OREANDA-NEWS. S&P Global Ratings today affirmed its 'AA' long-term issuer credit rating on Transport for London (TfL). We alsoaffirmed our 'A-1+' short-term issuer credit rating on TfL. The outlook is negative.

As defined in EU CRA Regulation 1060/2009 (EU CRA Regulation), the ratings on Transport for London are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with apre-established calendar (see "Calendar Of 2016 EMEA Sovereign, Regional, And Local Government Rating Publication Dates: Midyear Update," published Aug. 10,2016, on RatingsDirect). Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the reason for the deviation is our downward revision of the institutional framework for U. K. municipalities. The next scheduled rating publication on Transport for London will be on Oct. 14, 2016.

The affirmation follows the downward revision of our institutional framework assessment for U. K. municipalities to very predictable and well-balanced from extremely predictable and supportive.

Our downward revision of the institutional framework for U. K. municipalities reflects our anticipation of further deterioration in the revenue and expenditure balance amongst U. K. municipalities (for more information see "Cuts In Grants Are Weighing On U. K. Municipalities Ratings," published on Aug. 12, 2016).

The long-term rating on TfL is equivalent to our 'aa' assessment of its stand-alone credit profile. In our view, London will continue to be of strategic importance to the U. K. economy, and TfL continues to benefit from its exceptional liquidity position. The ratings on TfL also reflect the very predictable and well-balanced institutional framework within which it operatesas a U. K. local authority. Positively, we view TfL's overall commitment to fiscal discipline and the quality of its financial management as very strong. At the same time, we believe the U. K.'s referendum decision to leave the EU has led to an uncertain and more challenging operating environment for TfL, and much depends on the outcome of detailed Brexit negotiations. The rating isconstrained by the weakening budgetary performance driven by the reduction in government grants and substantial capital expenditure. Furthermore, TfL has a high level of tax-supported debt, which we expect to reach about 167% of consolidated operating revenues by 2019.

The negative outlook indicates that we would lower the rating on TfL if we lowered our long-term rating on the U. K. government because we do not believe that the institutional and financial framework allows U. K. local and regional governments to be rated above the sovereign.

We could also lower the rating over the next 24 months if we anticipated a considerable weakening in its financial management and control, potentially from adverse economic conditions in London or cost pressures from its significant capital projects.

We could revise the rating to stable over the next 24 months, if the outlook on the U. K. government was revised to stable and, at the same time, if TfL performs in line with our base-case expectations.