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 Trondheim (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 26 February 2024.

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 City of Trondheim’s AAA ratings are underpinned by the following credit strengths: i) a well-integrated institutional framework for Norwegian municipalities. Scope's assessment of the institutional arrangements establishes an indicative rating range for Norwegian municipalities, spanning from AAA to AA-. This evaluation highlights a well-structured framework for financial support and comprehensive fiscal equalisation systems, ensuring an effective response to crises; and ii) a robust individual credit profile characterized by strong debt affordability, ample liquidity, commendable budgetary performance, economic resilience, and robust governance quality. Furthermore, the city's dedication to climate action and its minimal carbon footprint compare favourable to other municipalities in Norway. Challenges include: i) a high debt stock; ii) limited revenue flexibility; and iii) limited expenditure flexibility.

While Trondheim's debt ratio estimated at 121% of its operating revenue in 2023 is higher than that of other large Norwegian municipalities, it remains manageable within the context of the city’s operating revenue. Despite the relatively high debt burden, Trondheim maintains low net interest payments thanks to substantial liquidity reserves and income generated by the city’s investment fund. Trondheim faces limited revenue flexibility due to significant reliance on transfers, closely mirroring the average of all Norwegian municipalities. Finally, Trondheim’s expenditure flexibility is constrained by several key factors aligned with the practices of all Norwegian municipalities. The allocation of significant funds to civil servant salaries constitutes a major share of the city’s operating spending, accounting for nearly half of the total. Additionally, a high share of social welfare spending limits the municipality’s ability to make substantial expenditure reductions.

The Stable Outlook represents Scope’s view that risks to the ratings over the next 12 to 18 months are balanced.

The ratings could be downgraded if: i) Norway’s sovereign rating was downgraded; ii) reforms to the Norwegian municipal framework materially weakened municipalities’ integration in institutional arrangements; and/or iii) Trondheim’s individual credit profile deteriorated significantly and structurally.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sub-Sovereigns Rating Methodology, 11 October 2023) 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 Jakob Suwalski, Senior Director

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