On Friday, 22 November 2008, credit ratings agency Moody’s lowered its ratings for Zagreb Utility Holding company (hereinafter: Holding) from Baa2 to Baa3 (from medium to lower solvency level) and for the City of Zagreb from Baa1 to Baa2 (from higher to medium solvency level). The ratings were downgraded owing to high indebtedness of the Holding and its poor debt repayment prospects, and they mainly reflect deterioration of the Holding's financial position. Despite the City’s low direct debt, its exposure to the financial operations of the Holding is considerable and even rising. As a result, the rating of the City of Zagreb was downgraded, as the Holding needed subsidies and City budget guarantees. Over the last two years, the Holding launched large-scale capital investments which almost tripled its debt from 2006. The fall in the City’s and Holding’s ratings was the result of the latter's heavy indebtedness which impacted directly on the City's financial and credit positions. This raises the question of the soundness and financial performance of utility companies within the Holding, particularly of the influence of the Holding’s borrowings on the City budget debt.