Moody’s raises the rating of Castilla y León after reducing its debt level by one point in 2023

Castilla y León closed 2023 with a debt of 13,865 million euros, according to data from the Bank of Spain published today, which is equivalent to 19.9 percent of the Gross Domestic Product (GDP), 2.3 percentage points below of the regional average. This lower level of indebtedness is one of the elements that has supported the recent decision of the Moody’s agency to improve the financial profile of the Community, raising the Baa1 rating from stable to positive outlook.

The contribution of Castilla y León to the global debt of the Spanish autonomies, as reported by the regional government, is small, specifically, at the end of 2023 it represented 4.26% of the total of the communities, recorded at 325,234 million euros.

As of December 31, 2023, Castilla y León accumulated liabilities of 13,865 million euros. This amount represents 19.9% ​​of its Gross Domestic Product, which represents a decrease of almost one percentage point in interannual calculation and more than 3 percentage points since 2020. Furthermore, this ratio remains below the regional average (22.2%), being 2.3 percentage points lower.

In calculating the volume of regional debt, the banking supervisor includes the repayable credits that the Community Administration grants to companiesquantified at 225.8 million euros, as well as the so-called ‘factoring without recourse’–commercial credits with the administration assigned to financial entities–, which adds 12.5 million euros and also the debt associated with collaboration projects public-private for 246.1 million euros.

This moderate level of indebtedness is one of the factors that the Moody’s agency has valued favorably in its decision on March 21 to improve the financial profile of the Community, raising the Baa1 rating to a positive outlook, thus ratifying the same rating that the Kingdom of Spain. In addition, it has also taken into account good budgetary and financial management, the contained deficits and the accessibility of Castilla y León to the debt market. This way, The Community recovers the rating it enjoyed in 2014 by this rating agency.

The analysis of the structure of the debt portfolio of Castilla y León in ESA 2010 (European System of Accounts) terms, taking into account who the lenders are, reveals that at the end of 2023, The largest amount corresponds to public debt issues, which represent 26%, with 3.6 billion euros. In second place is the Financial Facility Fund, with 1,965.8 million euros, specifically, 14.2% – corresponding to loans arranged in the years 2015 and 2020.

Relevant lenders also include multilateral financial entities, such as the European Investment Bank and the Development Bank of the Council of Europe, with 1,367.5 million euros, approximately 10% of the Community’s debt.

On the other hand, 96.6% of the Castilian and Leonese debt corresponded to the General Administrationcompared to 3.4% of universities, autonomous organizations, public entities governed by private law and public companies, among others.

Regarding maturity dates, 99.4% of the Community’s outstanding debt is long-term formalized compared to 0.6% signed short, which minimizes refinancing risks. Likewise, 74.3% is arranged at a fixed interest rate and 25.7% at a variable interest rate, a distribution that makes it possible to mitigate the effect of Euribor increases, and is entirely subscribed in euros.

Finally, the Bank of Spain also counts the debt of those regional public companies that are not included in the ESA 2010 perimeter at 4,151 million euros, without Castilla y León having been assigned any additional amount. In this way, taking into account the data of the entire regional public sector, the average debt to GDP ratio would rise at the end of 2023 to 22.5%, compared to 19.9% ​​in Castilla y León.