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Vancouver credit rating downgraded, in tandem with province’s, but TransLink stays the same

December 13th, 2012 · 20 Comments

This just out from Moody’s. Funny how TransLink is unaffected — must be all those reserves it’s been holding that the province is trying to make it spend.
Not great for the city, with the note that the debt from the Olympic village puts it out of line with other cities getting a Triple A rating.

Global Credit Research – 13 Dec 2012

 Toronto, December 13, 2012 — In conjunction with the revision of the Province of British Columbia’s outlook to negative, Moody’s has revised the outlook on the City of Vancouver’s Aaa rating to negative from stable and affirmed the ratings and outlooks for four other linked issuers: Municipal Finance Authority of British Columbia (MFABC), South Coast British Columbia Transportation Authority (TransLink), the University of British Columbia (UBC) and Simon Fraser University (SFU).

RATINGS RATIONALE

This announcement follows the change in the Province of British Columbia’s ratings outlook to negative from stable (http://www.moodys.com/research/Moodys-Revises-British-Columbias-Outlook-to-Negative-from-Stable-on–PR_261569). Following Moody’s assessment of the macroeconomic and funding linkages between the Province of British Columbia and its regional and local governments and government-related issuers, Moody’s has revised the outlook for the City of Vancouver and affirmed the ratings and outlooks for four issuers.

City of Vancouver — debt rating outlook changed to Aaa, negative from Aaa, stable.

The outlook revision for the City of Vancouver’s Aaa rating to negative from stable reflects the negative outlook on the Province of British Columbia. The city’s rating reflects its consistent, positive financial results, strong liquidity position and diversified economy. The city’s debt burden is, however, higher than most Aaa-rated Canadian municipalities and its rating presently benefits from support from the province and as such the city’s rating would likely move in tandem with the province’s rating and outlook.

The affirmations reflect the expectation that the following issuers would likely not be downgraded if the province’s rating were downgraded one notch:

Municipal Finance Authority of British Columbia (MFABC) — debt rating affirmed Aaa, stable.

The rating affirmation of MFABC reflects its strong institutional framework and substantial liquidity, along with its continued solid fiscal and financial position. The strong institutional framework provides significant debenture holder security, including the joint and several liability of members of regional districts that borrow from MFABC and the unlimited taxing powers on all taxable properties in the province of British Columbia.

South Coast British Columbia Transportation Authority (TransLink) — issuer and debt ratings affirmed Aa2, stable.

The rating affirmation of TransLink reflects the authority’s access to diverse revenue sources, including taxing authority, and strong governance and management framework requiring funded three-year financial plans, balanced by a sizable capital plan requiring significant debt. While the debt burden of TransLink has increased significantly in recent years, it is expected to stabilize and remain manageable within the current fiscal framework.

University of British Columbia (UBC) — issuer and debt ratings affirmed Aa1, stable.

The rating affirmation of UBC reflects its consistent operating performance, large endowment, strong liquidity and modest debt burden. The ratings also take into account the university’s strong market position, supported by robust student demand and extensive research activities.

Simon Fraser University (SFU) — debt rating affirmed Aa1, stable.

The rating affirmation of SFU reflects the university’s low and declining debt burden as well as its track record of consistent, stable operating performance. The Aa1 rating also reflects SFU’s strong market position as a mid-sized comprehensive university experiencing continued strong student demand.

WHAT COULD MOVE THE RATINGS UP/DOWN

City of Vancouver:

Stabilization of the outlook for the City of Vancouver’s rating would require (i) the stabilization of the Province of British Columbia’s rating outlook; and/or (ii) a sustained decline in the city’s debt burden, particularly a significant decline in the debt burden related to the Olympic Village financing, along with continued fiscal discipline and ongoing improvements in the city’s liquidity position. A downgrade of the Province of British Columbia’s rating could lead to a downgrade of the City of Vancouver’s rating.

Municipal Finance Authority of British Columbia, South Coast British Columbia Transportation Authority, the University of British Columbia and Simon Fraser University:

In the case of TransLink, UBC and SFU, while not expected in the near term, substantial improvements in the financial positions and creditworthiness of the entities could exert upward pressure on the ratings.

Any sector or issuer-specific risks causing a deterioration in an entity’s financial position or creditworthiness would put downward pressure on the ratings.

 

The principal methodologies used for regional and local governments were: “The Application of Joint-Default Analysis to Regional and Local Governments”, published in December 2008, and “Regional and Local Governments Outside the US”, published in May 2008. The principal methodology used for government-related issuers was: “Government-Related Issuers: Methodology Update”, published in July 2010. The principal methodologies used for universities were: “Government-Related Issuers: Methodology Update”, published in July 2010, and “Methodology for Rating Public Universities”, published August 2007. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

 

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody’s affiliates outside the EU are endorsed by Moody’s Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that has issued a particular Credit Rating is available on www.moodys.com.

 

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody’s considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody’s adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody’s considers to be reliable including, when appropriate, independent third-party sources. However, Moody’s is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody’s Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody’s ratings were fully digitized and accurate data may not be available. Consequently, Moody’s provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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  • !

    “Moody’s Investors Service has changed the outlook to negative from stable and affirmed the Aaa senior unsecured rating for British Columbia Hydro & Power Authority (BCH). This action has been taken in conjunction with a change in the outlook to negative from stable for the Province of British Columbia (Aaa).”

    http://www.moodys.com/research/Moodys-affirms-the-rating-for-BC-Hydro-changes-outlook-to–PR_262134

  • PW

    Just the first in a series.

  • Tessa

    Kind of shoots a big hole in the myth that the BC Liberals are somehow great economic managers, doesn’t it?

  • Mira

    What do you mean downgraded?
    The Economist said that we are the most popular, the most beautiful, the most livable, the most reputable, the most affordable…
    Oh, wait… “Fools Day” all year long as that, was all a load of crap!

  • mezzanine

    @ Tessa,

    Further in the report:

    [i] The Aaa rating, nevertheless, continues to reflect British Columbia’s high debt affordability, strong fiscal management and the high degree of fiscal flexibility inherent in the institutional framework governing the way Canadian provinces operate. The current low interest rate environment has enabled the province to issue long-term debt bearing historically low coupons, aiding fiscal flexibility. Furthermore, the province benefits from a track record of prudent fiscal management and meeting fiscal targets over the last decade.
    [/i]

  • mezzanine

    IMO, BC’s economy will play out due to many factors outside victoria’s control. Howevver, the status of the HST will play a large factor in the next year wrt BC’s economy, especially here in metro.

  • Richard

    Maybe it is time for TransLink to audit the Province.

  • Frank Ducote

    Richard – good one!

  • http://www.theyorkshirelad.ca/6urbandesign/vancouver.square/vancouver.square.html Roger Kemble
  • MB

    Richard #7

    Ha ha ha!

  • http://members.shaw.ca/urbanismo/thu.future/vancouver.failed.html Roger Kemble

    We differ from other states in regarding the man who holds aloof from public life not as quiet but as useless.” Said Pericles as he presided over the demise of Athens.

    Napoleon (Waterloo was his Waterloo!), Tony Blair (dodgy dossier), George W. Bush (weapons of mass destruction), Barack Obama (can’t get the numbers down: doesn’t care!)

    Locally, would we have done better with Mr. Peanut?

    Tom ‘Terrific‘ Campbell was a bummer. Gordon Campbell was worse. How is Mr. Mayor Kilt and Bagpipes doing? His Affordable Housing Task Force has been saved by the skin of its teeth as real estate crashes (we haven’t seen bottom: nowhere close!)

    Wages and jobs have crashed too . . .

    So wot’s up?

    Well there’s always the mountains and the sea. We are a world-class paradise: sheesh, that’s a relief. (UK’s Economist no longer agrees!)

    And now Premier décolletage Clark currently holes up with a Fraser Valley small town, hockey playing lawyer, finance minister, cooking the books ready for a February big surprise! (Like everyone does it).

    While everyone is downgraded, “Funny how TransLink is unaffected“.

    And the blogs are a-fire with shiny trinkets. Don’t disappoint the hoi polloi with reality.

    Forestry is down. Natural gas is down! Fishing is non-existent. Money laundering has taken a beating with real estate! But Macdonald’s is up. So is the Cactus Club.

    So is on-line bavardage and so is EI!

    And the blogs are agog with billion dollar shiny trinkets: C$5B and rising, latest count: why not? A Moody down grade doesn’t spell bankruptcy, just a minor inconvenience.

    And hey, we have the mountains. We have the sea.

    We are star dust! We are golden!” (thanxz Joni).

    We are paradise!

    But sooner than later, “we’ve got to get ourselves back to the garden.

  • Terry M

    Well said Roger!

  • Higgins

    Vancouver’s reputation … downgraded?
    No kidding. If you didn’t know, that happened in … 2008, when the most vicious anti taxpayers council & mayor were voted into power. Poor Vancouverites, he, he :-)
    I am not the only one that thinks Rudolph & gang are doing fishy deals with private interests detrimental to Vancouver.
    http://www.theprovince.com/news/Vision+business+deals+appropriate/7692557/story.html#axzz2FGCk7iZH
    And here’s a few more:
    Olympic Village … tens of $$$ million lost to the banks, and units severely discounted to multimillionaires.
    Zip cars, Car2Go coop share/ private entities … gifted public parking spaces throughout Vancouver.
    Separated bike lanes… $$$ millions, and now cca 12 $ million set aside for the effing BIXI racket!
    Public parking (see article above) for growing LOL vegetables, time-line for this “new investment”recovery… decades. A total joke!
    Backroom deals worth $ millions to the game/ social media developer Hootsuite… on industrial land…
    It goes like this:
    Mayor goes to New York on public money, gets to meet with the Rockefeller Brothers, on taxpayers dime, and then comes home with the clear agenda of selling us all to his ‘green’ lunatic friends.
    It must be … Santa Vision Vancouver!

  • David

    @Roger #11. suggests that Gordon Campbell was a worse mayor than Tom Campbell.

    http://youtu.be/DJ7sjqEODuk

    Hippies don’t want to pay their taxes. Unlike normal folk. 198 days to go. :)

  • Glissando Remmy

    Thought of The Day

    “Let me see. Oh, poor Yorick! I used to know him, Horatio—a very funny guy, and with an excellent imagination. He carried me on his back a thousand times, and now—how terrible—this is him. It makes my stomach turn. I don’t know how many times I kissed the lips that used to be right here. Where are your jokes now? Your pranks? Your songs?
    Your flashes of wit that used to set the whole table laughing? You don’t make anybody smile now. Are you sad about that? You need to go to my lady’s room and tell her that no matter how much makeup she slathers on, she’ll end up just like you some day. That’ll make her laugh…”
    – Hamlet, Act 5, Scene 1 , by Will The Bard

    I wanted to keep it Shakespearean in here, just like the ‘Jesus with a Hoodie’ looking fella’ at the end of your video clip, David #14.
    Priceless.
    Who knew?
    Tom Campbell must be turning in his grave… 44 years later and the irony is in the air, the city have been taken over by hippies, and adding insult to injury the mayor’s campaign was financed by the exact same American draft dodgers, “do-gooders”, charitable chaps… only now they see themselves as … “watermelons”.

    “Now, if we were in trouble, if they would not fight for their mother country, what do you think they would do for their adopted country? Nothing. Which is exactly what they are doing now. Exactly nothing!” – Tom Campbell

    For the answer to that question one must consult and peruse Vivian Krause’s blog/ articles re. to the Tides Foundation & comp.
    A gold mine of fine data and hard facts in there.

    For something rather fresh and right on the money, I would like to direct you to this gem of a post by Johnatan Baker:

    http://jonathan-baker.blogspot.ca/

    … the budget that none dare speak it name, alas poor Yorick!

    We live in Vancouver and this keeps us busy.

  • brilliant

    A typical waltsyssian screed. Yes, I’m sure Riverview was “hell” compared to a bedbug infested DTES dump where you’re easy pickings for pushers, or living out of a dumpster. And I bet the families of the 3 elderly women beaten within an inch of their life in our city by some nutter last week are so
    bleeding heart champagne socialists like our waltie exist.

  • MB

    @ brillo, it seems you’re on the wrong post.

    This one’s about downgrading Vancouver’s credit rating, not HEAT. Will the world ever recover from either issue?

    @ Roger, have land values actually tanked, like, you know, below the ocean that doesn’t rise? Dipped, maybe … until the next apolcalyptic financial collapse that’s always just around the corner.

    I suspect no-one’s paying attention, except the classics-quoting scribes above.

  • http://en.wikipedia.org/wiki/List_of_scientists_opposing_the_mainstream_scientific_assessment_of_global_warming#Scientists_arguing_that_global_warming_is_primarily_caused_by_natural_processes Roger Kemble

    Yes MB @ #17 Tanked!

    http://www.theeconomicanalyst.com/content/vancouver-housing-full-correction-mode-implications-canadian-banks

    And no, although EH insisted, The Sun also Rises the oceans do sometimes but the Gellhorn gal didn’t make them do it: nor do we!

    I know you have bet your genitalia on Delta going under, Tri-cities too, but I am told on the best authority that just ain’t gonna happen this month:

    Scientists in this section have made comments that it is not possible to project global climate accurately enough to justify the ranges projected for temperature and sea-level rise over the next century.

    I have included the full link to the above quotation under my name above because I don’t want you to have to wait until some slob at G&M awakes in the morning to give it head.

    It is so difficult to penetrate the rock solid carapace of ignorance shielding us West Coasters from the real world but here we are . . .

  • waltyss

    @brilliant not #16. What is there to say? brilliant not, you can’t even get on the right thread to spew your insults. It’s funny how cheap gin does that, isn’t it.

  • MB

    @ Roger 18, thank you for that informative link. I’ll have to look at it in more detail later, when time permits.

    In skimming the graphs I noticed that the prices, as I originally said, dipped, but have not tanked … yet.

    If the highest prices of recent years were equivalent to the summit of Mt. Hollyburn (~ 900m), then today’s dip has only descended to the upper viewpoint on the road to Cypress Bowl (~ 750m), well above the development cutline of 400m, or Jimmy Pattison’s British Properties house (~ 300M) where the prices were back in the 80s and 90s.

    (Some analogy!)

    Personally, I’d like a bit of a break on property taxes which are linked to assessments, and see prices come down another 25% for families looking for a home who value their time too highly to devote 60 hours a month commuting.

    We’ve discussed alternatives to detached homes and condos before, and I’d like to slip that in again just to reinforce the fact that using expensive land more efficiently as such is a viable middle ground.

    There are a number of professionals who could be dismissed as Doomers if they didn’t back up what they say with serious analysis, and I include Nicole Foss and Gail Tverberg in that lot.

    Their economic analysis includes the important role of energy as well as the artificialities of rampant institutional speculation and excessive debt, and therein have an edge in my view on traditional economists who have utterly failed to see the interdependency of the economy with the laws of physics.

    Until deflation and the failure of the world economy occur (not an unlikely scenario), and consumers default en masse on the debts incurred by paying for their excessive quantities of stuff with plastic, and being addicted to ever lengthening and weakening supply chains, then I believe Vancouver will still experience dipping and weaving — but still largely expensive — land values.

    What else is to be said other than to pay off your debts and live simply?

    Regarding Vancouver’s rating downgrade, a lot of people blame Vision (no surprise on this blog) for the Olympic Village debt (and causing cancer and drawing the the next asteroid strike), but I note that the units have been selling and the debt is getting paid down. We’ll see how much is left at the end of the day.

    But next time, please let Surrey host the games.