Reuters logo
Fitch Affirms Yaroslavl Region at 'BB-'; Outlook Stable
September 22, 2017 / 8:19 PM / in 25 days

Fitch Affirms Yaroslavl Region at 'BB-'; Outlook Stable

(The following statement was released by the rating agency) MOSCOW, September 22 (Fitch) Fitch Ratings has affirmed Russian Yaroslval Region's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-' and Short-Term Foreign Currency IDR at 'B'. The Outlook is Stable. The region's senior debt ratings have been affirmed at long-term local currency 'BB-'. KEY RATING DRIVERS Fitch projects Yaroslavl's operating margin will gradually improve to 3%-5% in 2017-2018 (2016: 2%) and further to 6% in 2019, which will then be sufficient to fully cover interest payments. Financial flexibility remains weak, despite the region's interim deficit shrinking to 1.7% of total revenue by end-7M17. Nonetheless, Fitch forecasts that the deficit before debt variation will persist over the medium term, albeit narrowing to 3.5%-6.5% of total revenue from 8.4% in 2016. We expect fiscal performance to be supported by continued increase in the region's taxation, albeit at a slower rate of 2%-2.5% in 2017 after a 7.8% rise in 2016. Taxes on average represented 88% of Yaroslavl's operating revenue in 2012-2016. Expenditure is historically rigid, with inflexible spending items (salaries and current transfers of all kinds) averaging at 93.3% of total expenditure in 2012-2016. As a result pressure from operating expenditure is likely to persist over the medium-term. Fitch expects direct risk will continue to increase to 75% of current revenue in 2017-2019, from 38% at end-2012. However, Yaroslavl's debt burden should remain consistent with the region's ratings. Interim direct risk stabilised at RU35.6 billion as of 1 August 2017 (2016: RUB35.6 billion or 69% of current revenue). The composition of the interim debt stock changed in favor of domestic bonds (51% of total debt vs. 35% in 2016), followed by low-cost federal budget loans (46%), while bank loans dropped to 3% from 24% in 2016. The region's immediate refinancing risk is somewhat immaterial with 10% of its current debt stock scheduled to mature by end-2017 as a result of tapping the debt capital market and budget loans. Yaroslavl is a frequent issuer and the administration expects a tap issue of up to RUB2.5 billion bonds in 2H17 in addition to the RUB7.5 billion 10-year bonds issued in May 2017. Recently issued bonds have improved the maturity profile of the region's debt portfolio to 4.6 years (2016: 3.6 years). A well-diversified local economy helps keep wealth metrics in line with the national median. Various sectors of the processing industry provide the region with a broad tax base. The top 10 taxpayers contributed 36% of Yaroslavl's tax revenue in 2015-2016. In 2016, the region's gross regional product grew 1.2%, versus the Russian economy's 0.4% fall. According to the administration's restated base macro-forecast 3.6% economic growth is projected in 2017, before rising to 4%-4.5% in 2018-2019. The region's credit profile remains constrained by the weak institutional framework for Russian local and regional governments (LRGs), which has a shorter record of stable development than many of the region's international peers. The predictability of Russian LRGs' budgetary policy is hampered by frequent reallocation of revenue and expenditure responsibilities between government tiers. RATING SENSITIVITIES An improvement in the operating balance towards 10% of operating revenue, coupled with debt coverage ratio (direct risk-to-current balance) at around 10 years (2016: negative 14 years) for a sustained period could lead to an upgrade. Inability to restore a positive current balance and widening of the deficit above 10% of total revenue could lead to a downgrade of the ratings. Contact: Primary Analyst Konstantin Anglichanov Director +7 495 956 9994 Fitch Ratings CIS Ltd 26 Valovaya Street Moscow 115054 Secondary Analyst Alexey Kobylyanskiy Analyst +7 495 956 9980 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Fitch has made a number of adjustments to the official accounts to make the LRG comparable internationally for analysis purposes. For Yaroslavl these adjustments include: - Transfers of capital nature received were re-classified from operating revenue to capital revenue; - Transfers of capital nature made were re-classified from operating expenditure to capital expenditure; - Goods and services of capital nature were re-classified from operating expenditure to capital expenditure. Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 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 EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below