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30.10.2007
Credit-Rating rates city of Severodonetsk at uaBB+
Credit-Rating, a nationally recognized credit rating agency in Ukraine has today assigned city of Severodonetsk (Lugansk Oblast) a long-term credit rating of uaBB+ (uaBB plus). The agency has also assigned City`s UAH20m 5-year debt obligation a long-term credit rating of uaBB+ (uaBB plus). The outlooks on both ratings are Stable. In the course of analysis Credit-Rating considered City`s social and economic indicators for 2002-2006 and 1Q2007 as well as other inside information furnished by the city council.
An obligor or a debt liability with uaBB credit rating is characterized with the LOWER THAN SUFFICIENT creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is strongly affected by adverse changes in commercial, financial and economic conditions. The plus (+) or minus (-) modifier denotes rating`s relative status within major categories.
`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`s key performance indicators have grown in 2002-2006, namely the industrial production sales, export goods turnover, foreign direct investments, investments into fixed capital, retail turnover, and homes delivered. Albeit, certain 2006 per capita indicators remained lower than those averages in Ukraine.
- Decreased city budget`s dependency upon transfers, specifically the approved for 2007 volume of levelling subsidies from the State budget has been lowered 34.2 per cent as compared to 2006.
- The city council does not have a direct debt as of Jan. 1, 2007.
- The city management team enjoys a significant experience accompanied by high consolidation of the local government which contributes to implementation of the City development strategy.
Factors constraining the credit rating
- The city economy is single-oriented being dependant upon Azot CJSC, in fact Azot`s sales accounted for 85.6 per cent of the overall city`s industrial production sales; the volume of taxes and duties paid by Azot to city budget 2006 accounted for 27.8 per cent of the budget general fund excluding transfers.
- The City have not fulfilled the plan on budget gains resulting from failure in implementation of the plan on individuals tax gains, which specific gravity in overall budget incomes excluding transfers accounted for 75.2 per cent.
- City`s dependency upon transfers from the State budget, namely the levelling donations, which specific gravity in revenues accounted for 9.5 per cent in 2006.
- High deterioration of main funds, including homes and infrastructure, which requires significant investments for their renovation.
- The size of the planned issue of UAH20m exceeds significantly the development budget revenues for the past five years.
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
