Scope Ratings GmbH ("Scope") monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings' performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the City of Milan (BBB+/Stable; S-2/Stable) on 8 November  2021. This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The BBB+ rating reflects the City of Milan’s solid operating performance and large cash holdings stemming from prudent budgeting and sound financial management, which help compensate for the significant pressure on municipal finances caused by the Covid-19 economic shock, and its strategic importance as Italy’s economic and financial hub, supporting the recovery outlook. In addition, the city benefits from a supportive institutional framework, enabling Italian municipalities to balance revenues and expenditures under adverse conditions via budgetary transfers and secured access to funding at reasonable rates via the state-owned development bank Cassa Depositi e Prestiti. Credit challenges relate to Milan’s high debt stock, limited revenue flexibility, as well as sizeable, yet manageable, contingent liabilities.

The Stable Outlook represents Scope’s view that risks to the ratings over the next 12 to 18 months are balanced. The ratings/Outlooks could be upgraded if, individually or collectively: i) the ratings/Outlooks on Italy are upgraded; and/or ii) changes to the institutional framework result in higher revenue flexibility. Conversely, the ratings/Outlooks could be downgraded if, individually or collectively: i) Italy’s sovereign ratings/Outlooks are downgraded; ii) changes to the institutional framework adversely affect the city’s individual credit profile; and/or iii) the city’s debt stock increases notably.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sub-Sovereigns, 12 May 2021) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Giulia Branz, Analyst.

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