Moody's News - Montreal's debt rtg. revised to A2 from A1 Moody's revises the city of Montreal's debt rating to A2 from A1

Business Wire, May 16, 1995

NEW YORK--(BUSINESS WIRE)--May 16, 1995--Effective today, Moody's Investors Service revised the City of Montreal's debt rating to A2 from A1, following a full credit review started earlier this year.

The new rating reflects the following credit considerations:

-- The city's current focus on mitigating the tax burden, without commensurate, timely reductions in the expenditure base is expected to reduce financial flexibility and make balancing municipal operations more difficult in the future. Corrective actions on the spending side are expected to be introduced, but flexibility in this area will be limited by the fixed nature of many expenditures and the potential difficulty involved in downsizing the workforce. As it did in the current fiscal year, the city is likely to seek special provincial support to close the budgetary gap in future years.

-- The level of debt as compared to the city's taxable resources increased appreciably largely due to a decline in assessed values. Debt issued by the city in support of the paramunicipal organizations will also remain a financial burden for a longer period than originally anticipated, given the expected delays in the sale of real estate assets, the proceeds of which are to be used to retire debt. Nevertheless, the debt burden should begin to stabilize as the bulk of the support program has been completed and efforts to reduce capital expenditures are implemented.

-- The large and diverse economy of the city and its importance as the province's leading economic center, continues to provide a sufficient resource base to support financial and debt obligations. Signs of renewed economic growth have begun to emerge, although, structural unemployment and suburbanization trends remain a challenge to the long-term economic outlook.

The amount of gross debt outstanding is nearly CANDLRS 2.5 billion.

CONTACT: Moody's, New York

Yves Lemay, 212/553-4384

Debra Roane, 212/553-7815