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05.12.2005
Cherkasy city council issued credit rating for bond issuance to fund new water supply
Credit-Rating, an independent rating agency, announced the award of a long term “uaBBB” credit rating on the Ukrainian national scale to the Cherkasy city council bond issuance.
Cherkasy will issue UAH 5 million municipal bonds with a five-year circulation term.
The funds will be invested in construction of new energy saving water supply, according to Anatoliy Voloshin, Cherkasy city mayor. The new facility is expected to decrease the price of electricity to UAH 0.08 per one kilowatt. The city will launch a similar project on Dec. 8, a new boiler system in one of Cherkasy largest communities that will serve its 60,000 inhabitants.
A long term “uaBBB” credit rating reflects the financial stability of the contractor and the issuer’s ability to maintain its debt obligations in the Ukrainian finance market. However, experts said that such obligations are more vulnerable to changes in financial, commercial and economical spheres.
During the presentation Stanislav Dubko, Credit-Rating’s general manager, described the results of the rating research and the factors that supported and restrained the credit rating.
Dubko mentioned the growth of budget revenues of Cherkasy without subsidies and other governmental financing from UAH 68.7 million in 2000 to about UAH 132.5 million in 2004 as factors that supported the credit rating level.
In the future Cherkasy is also planning to develop its airport as a transit and service center. Three plans are being considered to attract financing to the project, including partial funding from the city budget.
The project could also be funded through additional investment or loans, according to Pavlo Karas, director of the department for European Integration of Cherkasy city council.
Although the underwriter’s name has not been mentioned yet, Karas said it would be one of Ukraine’s major banks. So far, all the conditions of the issuance are settled, according to Karas.
The issuance’s terms will be at an interest rate of 14 percent and an underwriter’s commission of 1.5 percent.
The planned issuance is a pilot version and in case of its success, the city is planning to issue more bonds. The next issuance could total about UAH 20 million, Karas said.
In compliance with the current legislation, Cherkasy is not allowed to issue Euro bonds (less than one million population). It will not seek an international credit rating, unlike Ivano-Frankivsk.
“Cherkasy fully trusts the national rating agency,” Karas underlined.
Natalia Dzhugan, director of Cherkasy finance management, provided an overview of the city’s recent expansion and growth.
She said that the volume of retail sales has increased during last five years by 2.2 times to about UAH 706 million in 2004.
“The grown of the city’s economy, investment activity and wages has resulted in growth of the city’s budget revenues. It’s expected the further growth up to more than UAH 170 million in 2005,” Dzhugan said.
Cherkasy’s industrial enterprises are providing about 70 percent of the entire production in Cherkasy oblast.
Ihor Yatsenko
