(The following statement was released by the rating agency)LONDON/WARSAW, October 29 (Fitch) Fitch Ratings has affirmed the Polish City of Rzeszow's Long-term foreign and local currency ratings at 'BBB' with a Stable Outlook. Fitch has also affirmed the National Long-term Rating at 'A+(pol)' with Stable Outlook.KEY RATING DRIVERSThe affirmation reflects the city's good strategic and financial management and the relatively good performance of the local economy. However, the ratings also factor in the projected dynamic growth of the city's debt in 2013-2015, although it should remain moderate, and subdued operating results. The city's sound management is demonstrated by its success in acquiring high EU and state grants. EU grants may finance more than 50% of the city's high capex in 2013-2015 (25% of the total spending on average). Rzeszow continues to increase the efficiency of its public services delivery and has no plans to use any quasi-debt instruments or to transfer risk or debt to its dependent entities. As a result, it has lower contingent liabilities than most of its Polish peers at only PLN23m at end-2012. Rzeszow is the economic engine of south-east Poland, with a diversified economy and growing private investments in the city's recently expanded catchment area. GDP per capita has risen quickly in the Rzeszow sub-region, in which the city is located, to 80% of the national average in 2010 from 74% in 2007. Fitch believes that the city is more prosperous than its surrounding sub-region. The good performance of the local economy continues to support growth of the city's tax base and should lead to faster growth of tax revenue than its peers. Together with the city's committed approach to cost control, these features should support Rzeszow in its attempts to improve its operating results in 2013-2015. Following planned large investments Fitch expects the city's debt to rise to PLN460m at end-2013 and PLN630m in 2015. However, at less than about 75% of current revenue, it should remain moderate. The city has already secured a PLN300m European Investment Bank loan, which will be partly utilised for investments scheduled for 2013-2015. With its advantageous terms of below-market interest rates, a six-year grace period and 25-year maturity for each tranche, the loan limits the debt service pressure on the budget.Fitch expects Rzeszow's operating results to recover in 2013-2015, after weaker results in 2012, which were adversely affected by a dip in operating revenue. For 2013, Fitch expects the city to report a better operating balance at PLN48m (2012: PLN38m) equal to around 6% of operating revenue, which should gradually rise to about 8% in 2015. This should stem from faster growth in operating revenue and good cost control, which should keep opex growth below operating revenue growth.The city's operating balance should consequently more than cover its debt service requirements, which may average about PLN50m annually in 2014-2015. The debt to current balance ratio should recover to about 14 years in 2013-2015 (19 years in 2012), corresponding satisfactorily with the city's long-term debt maturity.RATING SENSITIVITIESThe ratings could be downgraded if Rzeszow's growing debt is not accompanied by improved operating performance, so that for a sustained period its operating balance materially fails to cover its debt service. The ratings could be upgraded if Rzeszow sustains an operating balance covering its debt service by 1.5x, accompanied by diminishing recourse to debt-financed capital expenditure.Contact: Primary AnalystRenata DobrzynskaDirector+48 22 338 62 82Fitch Polska S.A.16 Krolewska StreetWarsaw 00-103 Secondary AnalystMaurycy MichalskiAssociate Director+48 22 330 67 01Committee ChairpersonRaffaele CarnevaleSenior Director+39 02 87 90 87 203Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.Additional information is available on 
  www.fitchratings.com.
  Applicable criteria, 'Tax-Supported Rating Criteria', dated 14 August 2012, and 'International Local and Regional Governments Rating Criteria outside United States', dated 9 April 2013, are available on 
  www.fitchratings.com.
 Applicable Criteria and Related Research: Tax-Supported Rating Criteria 
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
 International Local and Regional Governments Rating Criteria
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704438
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=806388
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