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 21 October 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 latest 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 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 characterised by strong debt affordability, ample liquidity, commendable budgetary performance, economic resilience, and robust governance quality. Furthermore, the city's dedication to climate action and minimal carbon footprint compare favourably to other municipalities in Norway.

Challenges include: i) a high debt stock: While Trondheim's debt burden is higher than that of other large Norwegian municipalities, it remains manageable within the context of the city’s operating revenue. Additionally, Trondheim maintains low net interest payments thanks to substantial liquidity reserves and income generated by the city’s investment fund; ii) limited revenue flexibility: Trondheim faces limited revenue flexibility due to significant reliance on transfers, closely mirroring the average of all Norwegian municipalities; and iii) limited expenditure flexibility: 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 portion of the city’s operating spending, accounting for nearly half of the total. Additionally, a high proportion 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 2024) 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

© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis 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.