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 31 January 2023.

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 City of Milan’s BBB+ rating is driven by:

1. An integrated institutional framework, which results in a close alignment of the Italian cities’ creditworthiness with the Italian central government’s BBB+/Stable ratings. This includes conditional financial assistance mechanisms, restrictions on cities’ debt and liquidity management and sovereign on-lending through the state-owned promotional bank Cassa Depositi e Prestiti. Also, budgetary support measures have been made available to cities during shocks, such as the Covid-19 pandemic.
    
2. A strong individual credit profile, characterised by Milan’s conservative debt and liquidity management, reflected in a robust debt profile and ample cash reserves, which, together with the city’s sound budget management, supports debt reduction. The credit also benefits from a dynamic local economy, as Italy’s leading commercial, industrial and financial hub. Credit challenges relate to a high debt stock, limited revenue flexibility, and sizeable, yet manageable, contingent liabilities.

The Stable Outlook reflects our 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.

For the rating annex accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sub-sovereigns Rating Methodology, 11 October 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

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