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19.10.2007
Credit-Rating assigns city Cherkasy`s upcoming bond issue uaBBB
Credit-Rating, a nationally recognized credit rating agency in Ukraine has today assigned UAH65m 5-year bond issue by Cherkasy city council a long-term credit rating of uaBBB bearing Stable outlook. Credit-Rating also affirms ratings of uaBBB / Stable outlook assigned to the city of Cherkasy and city council`s UAH5m 5-year debt. In the course of analysis Credit-Rating considered City`s financial statements for 2002-2006 and 1H2007 as well as other inside information furnished by the city council.
An obligor or a debt liability with uaBBB credit rating is characterized with the SUFFICIENT creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is affected by adverse changes in commercial, financial and economic conditions.
`Stable` outlook indicates that there are no anticipated reasons to change the rating in the course of the year.
Factors maintaining the credit rating
- City budget gains excluding transfers grew 33.9 per cent in 2006 and 37.5 per cent in 1H2007 as compared with the previous budget periods.
- Decreased city budget`s dependency upon transfers from higher-level budgets, specifically the levelling subsidies approved for 2007 were lowered 7.1x to UAH2.9m compared to the previous budget period, which accounts for 1.2 per cent of the city budget general fund for the period given, excluding transfers.
- City`s social development indicators grew in 2006 and 1H2007, namely growth in number of employees, growth in average salary accompanied by low unemployment rate, which remains below country`s average.
- City`s key figures grew in 2006 and 1H2007, namely industrial production sales, investments into fixed capital, export turnover, retail turnover, direct foreign investments, and home buildings constructed.
- Low city`s direct debt as of July 1, 2007 coupled with its moderate planned growth, in fact the city budget`s debt burden will account for 23.3 per cent in case the planned bond issue is placed in full.
Factors constraining the credit rating
- City budget`s revenues are dependant upon incomes from individuals` tax (the specific gravity of this source in total budget incomes excluding transfers account for 70 per cent) coupled with the low salary growth rates in 2004-2006 and 1H2007 as compared to the similar country`s average figures; 1H2007 saw decrease in average salary which now amounts to UAH1200 with UAH1225 country`s average.
- High deterioration of city`s main funds, including housing sector, utility and transport infrastructure, which requires significant investments for their renovation.
Information on all credit ratings assigned in accordance with the Ukrainian national scale may be found in REUTERS, BLOOMBERG and FTN MONITOR information systems.
For further information, please contact:
Information and analytic department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
