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 (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BBB+/Stable; short-term local- and foreign- currency issuer ratings: S-2/Stable) on 8 August 2022.

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

For the updated Rating Report accompanying this review, click here.

The BBB+ rating reflects the City of Milan’s sound budgetary and financial management, ample liquidity, wealthy socio-economic profile and effective governance. In addition, the rating is supported by an integrated institutional framework under which Italian cities operate, which ensures fiscal discipline and presents a record of budgetary and funding support from the central government. These elements support our view that the city’s finances will be able to weather the withdrawal of pandemic-related central government support and resume a path of reduction in debt levels, although the Covid-19 shock and now the economic ramifications of the Russia-Ukraine war reduce the budgetary room for manoeuvre. Credit challenges relate to Milan’s high debt stock, limited revenue flexibility, and its sizeable, yet manageable, contingent liabilities.

The Stable Outlook reflects out view that risks to Milan’s rating are balanced over the next 12 to 18 months.

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 budgetary and financial flexibility. Conversely, the ratings/Outlooks could be downgraded if, individually or collectively: i) Italy’s sovereign ratings/Outlooks are downgraded; ii) there is a protracted deterioration in the city’s operating margins, weakening debt affordability; and/or iii) the city’s debt stock increases notably.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sub-Sovereigns Rating Methodology, 5 May 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Giulia Branz, Senior Analyst

© 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.