Investing.com -- S&P Global Ratings revised the credit outlook of the City of Paris to negative from stable on March 4, 2025, following a similar revision for France on February 28, 2025. The ratings agency affirmed the ’AA-/A-1+’ long- and short-term issuer credit ratings for the city.
The decision to revise the outlook for Paris is closely linked to the similar action taken for France. The strong ties between the central government and French local and regional governments (LRGs) influence the ratings cap on Paris, which is set at the level of the sovereign credit ratings on France.
The negative outlook on Paris reflects the similar outlook on France, as the ratings on the city are capped at the sovereign credit rating level.
Factors that could lead to a downgrade of the ratings on Paris include a similar rating action on France or significant deterioration in the city’s debt position due to persistent budget deficits over the next 24 months. This could occur due to further delays in the recovery of the real estate market and the associated increase in property transfer fees, or if the city’s financial management team fails to prevent a persistent weakening of Paris’ budgetary position.
On the other hand, the outlook could be revised to stable if a similar action is taken on France, provided that the city performs in line with the base-case forecast within the next 24 months.
The outlook revision for Paris follows the similar action on France and is in line with S&P Global Ratings’ criteria for rating non-U.S. LRGs and their related sovereigns. The ratings agency does not believe that the institutional and financial framework of French LRGs allows any of them to be rated above the sovereign.
The ratings on Paris reflect S&P Global Ratings’ expectation that the city will maintain an operating budget balance broadly above 5% over the forecast horizon. The agency also anticipates that the city’s management will gradually decrease its capital expenditure to contain its deficits and further increases in debt, given the higher cost of borrowing and increased refinancing requirements. Despite these measures, the long-term rating remains below the ’aa’ assessment of the city’s standalone credit profile.
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