LONDON (S&P Global Ratings)--S&P Global Ratings said today that the Greater London Authority's (GLA's) additional funding to support the completion of the Crossrail project will not materially weaken its view of the U.K. strategic authority's debt burden.

On Dec. 1, 2020, GLA announced that it will provide a further £825 million of financial support to Crossrail to cover cost overruns. Our current base case assumed a similar level of financial support but anticipated that GLA would draw on its own liquid funds rather than issue additional debt.

In our view, GLA can raise this debt without weakening its debt burden. We include the revenues and debt of GLA-governed Transport for London (TfL) in our calculation of GLA's debt burden. All else being equal, the additional debt required to buttress Crossrail will increase GLA's tax-supported debt marginally to 186% from 179% of operating revenues, by the end of the financial year ending March 31, 2022. Our base case assumes TfL's ridership will improve next year, which should prevent GLA's debt burden deteriorating further. In November, TfL's weekly tube ridership was just 25% of 2019 levels, and bus operations saw passenger numbers fall to 48% compared with the previous year.

Our negative outlook on GLA reflects that we could lower the rating if its debt burden becomes significantly higher than we currently anticipate. In such a scenario, GLA's consolidated operating revenues would be substantially weaker than our forecast, perhaps driven by adverse performance in face of the COVID-19 pandemic or if TfL's ridership remained heavily subdued. Lower revenues or material increases in debt could push tax-supported debt above 240% of revenues, which would exacerbate GLA's debt burden, in our view.

Our ratings and outlook on GLA (AA/Negative/A-1+) are unchanged by this announcement.

This report does not constitute a rating action.

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