S&P: Australian Treasury Corp. of Victoria Ratings Affirmed At 'AAA/A-1+'; Outlook Remains Negative
The outlook reflects that on TCV's owner, the Australian State of Victoria (Victoria). While Victoria's stand-alone credit profile is 'aaa', its outlook reflects that on the Commonwealth of Australia. The ratings on TCV reflect our assessment of an almost certain likelihood that extraordinary support would be forthcoming from TCV's owner and guarantor, Victoria, in a distress scenario.
In accordance with our criteria for government-related entities (GREs), our view of an almost certain likelihood of extraordinary support reflects our assessment of TCV's:Critical operational role in managing the state's and its authorities' debt, a significant proportion of the state's financial assets, and in providing corporate finance advice. In our view, a default by TCV would have a critical impact for the Victorian government because TCV's debt is guaranteed by the government and TCV is the sole provider of debt financing to the state and its authorities. Integral link with the Victorian government, which owns TCV and provides guarantees to it. TCV and its owner are so intrinsically linked that we assess the operations of TCV and its management of borrowings, liquidity, and financial risks when considering the credit rating on Victoria. TCV is the central financing authority for Victoria, the state's statutory authorities, and public trading enterprises. TCV's business strategy is to provide clients with competitive debt funding and offer them financial risk and corporate finance advisory services.
Victoria guarantees TCV's payment obligations in relation to its borrowings, the securities it issues, and its derivative transactions under state laws. State laws also allow any amounts needed to fulfil any liability under the guarantee to be taken from the state's consolidated fund.
We do not assign a stand-alone credit profile on TCV because of the almost certain likelihood of timely extraordinary government support, and we don't think TCV would be subject to any transition risk as it is a nonseverable arm of the government.
The negative outlook on TCV reflects that on its owner, Victoria, and represents at least a one-in-three chance of a downgrade within the next 12-24 months. A lowering of the long-term rating on Victoria would trigger the same action on TCV.
We could revise the outlook on TCV to stable if we took a similar action on Victoria, providing TCV's role and link to the state remain unchanged.