Moody’s Upgrades Baja California

Moody’s has upgraded the issuer ratings of the State of Baja California to Baa1 (Global Scale, local currency) and Aa1.mx (Mexican National Scale) from Baa3 and Aa3.mx, respectively. The rating action was prompted by the state’s good financial performance, moderate debt profile and the expectation that the state’s water companies will not require financial aid from the state despite their relatively large and increasing debt levels. The rating action also took into account an agreement reached between the state government and its labor unions to increase both parties’ contributions to the state social security system, ISSTECALI, which will make the state’s annual payment obligation more predictable. During the past five years the state’s direct debt levels have remained fairly stable, at around 6% of revenues. This year, the state expects to obtain loans for Ps 1,150 million to finance several capital investment projects, which will increase its direct debt to 10% of revenues and debt service requirements to a still modest 2% of revenues for several years.