(The following statement was released by the rating agency)
MOSCOW, September 16 (Fitch) Fitch Ratings has affirmed the
Region's Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) at
'BB', Short-Term Foreign Currency IDR at 'B' and National
Long-Term Rating at
'AA-(rus)'. The Outlook on the Long-Term ratings is Stable.
The region's outstanding senior unsecured domestic bonds have
been affirmed at
'BB' and 'AA-(rus)'.
The affirmation reflects Fitch's unchanged base line scenario
region's budgetary performance and our expectation that the
region will maintain
a positive current balance and moderate direct risk in the
medium term, as
commensurate with the ratings.
KEY RATING DRIVERS
The 'BB' ratings reflect the region's average-sized economy, a
institutional framework for Russian LRGs and deterioration of
economic environment, which may put pressure on Tula's budgetary
over the medium term. They also reflect the region's moderate
direct risk with
limited exposure to immediate refinancing risk and satisfactory
performance with a sufficient operating balance to cover
Fitch expects the operating balance to be close to the region's
average at about 6%-7% of operating revenue in 2016-2018, and
the current margin
to remain positive at 4%-5%. Tula's budgetary performance
during 1H16, with a surplus before debt variation on the back of
restraint, while revenue proceeds grew as budgeted. However, as
likely to accelerate during 2H16, we are maintaining our
projection of a
RUB2.8bn budget deficit for the full year. Fitch assumes the
continue to record a deficit before debt at about 3%-5% of total
2016-2018 (2015: 0.9% deficit).
Fitch expects Tula's direct risk will continue to increase but
at below 35% of current revenue in 2016-2018 (2015: 27%). As of
1 August 2016
the region's direct risk was composed of federal budget loans
and domestic bonds
and amounted to RUB15.7bn, little changed since the beginning of
Subsidised budget loans constitute 59% of total direct risk, and
annual interest rates allow the region to save on interest
Despite the moderate debt burden, Tula is exposed to refinancing
pressure in the
medium term as it has to repay all outstanding debt over the
next three years.
Immediate refinancing risk is moderate as the region's RUB0.5bn
RUB0.7bn budget loans due in 2016 are fully covered by RUB2.4bn
and standby short-term credit facilities from the Russian
The regional economy has a well-diversified processing industry
growth has outpaced the national average for four years in a
row. According to
preliminary data, in 2015 the regional economy grew 4.7%, in
contrast to the
national GRP decline of 3.7% and the administration expects
growth to continue
in 2016. Nevertheless, the region's economy remains moderate in
context, with GRP per capita at 93% of the national median in
forecasts a 0.5% decline of national GDP in 2016, which in turn
could weigh on
the region's economic and budgetary performance.
The region's credit profile remains constrained by the weak
framework for Russian LRGs, which has a shorter record of stable
than many of its international peers. The predictability of
budgetary policy is hampered by frequent reallocation of revenue
responsibilities within tiers of government.
A sound budgetary performance with an operating margin above 10%
on a sustained
basis, accompanied by moderate direct risk below 40% of current
lead to an upgrade.
Conversely, deteriorated budgetary performance with an operating
consistently below 5%, accompanied by weak debt payback
exceeding 10 years
(2015: 3.1years), could lead to a downgrade.
+7 495 956 99 01
Fitch Ratings CIS Ltd
26 Valovaya Street
+7 495 956 99 94
+49 69 768076 111
Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495
956 9908, Email:
firstname.lastname@example.org; Peter Fitzpatrick,
London, Tel: +44 20
3530 1103, Email: email@example.com.
Additional information is available on www.fitchratings.com
Fitch has made a number of adjustments to the official accounts
in order to make
the LRG comparable internationally for analysis purposes. For
Tula region these
- Transfers of capital nature received were re-classified from
to capital revenue.
- Transfers of capital nature made were re-classified from
to capital expenditure.
- Goods and services of capital nature were re-classified from
expenditure to capital expenditure.
International Local and Regional Governments Rating Criteria -
United States (pub. 18 Apr 2016)
Dodd-Frank Rating Information Disclosure Form
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS
here. IN ADDITION,
ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE
FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.
DETAILS OF THIS
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH