(The following statement was released by the rating agency)
MOSCOW, September 02 (Fitch) Fitch Ratings has affirmed the
Russian Republic of
Sakha's (Yakutia) Long-Term Foreign and Local Currency Issuer
(IDR) at 'BBB-', Short-Term Foreign Currency IDR at 'F3' and
Rating at 'AA+(rus)'. The Outlooks on the Long-Term IDRs are
Negative and the
Outlook on the National Long-Term Rating is Stable.
The republic's senior debt ratings have been affirmed at
currency 'BBB-' and National long-term 'AA+(rus)'.
The affirmation reflects Sakha's strong resource-based economy,
low debt by
international standards and sound fiscal performance, which
should help keep key
credit metrics stable. The Negative Outlook reflects that on the
KEY RATING DRIVERS
The ratings reflect Sakha's fairly low direct risk and sound
performance, which is supported by a strong local economy. The
ratings also take
into account sizeable contingent liabilities, and the
concentrated nature of
Sakha's tax base, which leaves the republic particularly exposed
prolonged economic slowdown.
The region's credit profile remains constrained by a weak
framework for local and regional governments (LRGs) in Russia.
institutional framework for LRGs has a shorter record of stable
many international peers. The predictability of Russian LRGs'
is hampered by the frequent reallocation of revenue and
responsibilities among government tiers.
Fitch's 2016 base case remains largely unchanged and reflects
that Sakha will maintain sound operating surpluses at about
9%-11% of operating
revenue in the medium-term, supported by continuous growth of
Taxation rose to 57% of total revenue at end-2015 (2014: 53%),
revenue up 12% yoy (2014: 12% increase). Current transfers, on
dropped to 37% of operating revenue from an average of 45% of in
We expect Sakha to maintain moderate debt at below 30% of
current revenue this
year, before potentially rising to 32%-37% in 2017-2018 (2015:
debt portfolio is diversified, with an average maturity of
around two years. The
republic's debt stock as of end-July 2016 was 48% composed of
followed by loans contracted from the federal government (46%)
and bank loans
(6%). In May 2016 Sakha issued a five-year domestic bond of
relieving refinancing pressure.
The republic's moderate exposure to contingent risk is likely to
manageable and consistent with the current ratings over the
medium-term. This is
due to adequate control exercised by the administration, despite
amount of accumulated contingent liabilities. The republic's net
increased slightly to 38.5% of current revenue in 2015 from
36.5% in 2014. We
expect continued growth of the republic's net overall risk,
likely to above 50%
in 2017-2018. Sakha provides support to its under-developed
across the region's vast territory amid harsh climatic
conditions but a
disproportionate growth of contingent risk will put the region's
creditworthiness under pressure.
Sakha has a strong economic profile supported by rich deposits
resources, such as diamonds, coal, oil, natural gas and gold.
The region's prime
taxpayers are mostly national champions in development of
natural resources. The
republic's 2014 gross regional product per capita and average
respectively, 2.2x and 2.5x higher than the national median.
At the same time the regional economy remains concentrated as
the top 10
taxpayers' contributions increased to 63% of the consolidated
tax revenue in 2015 from 60% a year earlier. This poses a risk
in the medium
term, due to the volatile nature of the commodities' markets.
2015 tax revenue was boosted by rouble depreciation, which
taxpayers' revenue in the mining and oil and gas sectors.
mining fixed assets were commissioned in the region last year,
increased 2015 property tax proceeds.
A downgrade of Russia or growth of net overall risk to above 50%
revenue, coupled with a sharp deterioration of its direct
balance ratio, would lead to a downgrade.
+7 495 956 9994
Fitch Ratings CIS Ltd
26 Valovaya Street
+7 495 956 9901
+49 69 768076 111
Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495
956 9908, Email:
firstname.lastname@example.org; Peter Fitzpatrick,
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Fitch has made a number of adjustments to the official accounts
in order to make
the LRG comparable internationally for analyses purposes:
- Transfers received of capital nature were re-classified from
to capital revenue.
- Transfers made of capital nature were re-classified from
to capital expenditure.
- Goods and services of capital nature were re-classified from
expenditure to capital expenditure.
Additional information is available on www.fitchratings.com
International Local and Regional Governments Rating Criteria -
United States (pub. 18 Apr 2016)
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