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Moody's Interfax takes rating actions on Russian sub-sovereigns.

Summary: Moody's Interfax Rating Agency has today affirmed the national scale ratings of 16 Russian regions

Moody's Interfax Rating Agency has today affirmed the national scale ratings of 16 Russian regions and

municipalities, and one government-related issuer. These rating actions

follow Moody's placement of Russia's B1 government bond rating on

review for downgrade on 28 March 2014. For additional information, please

refer to the related announcement:

https://www.moodys.com/research/Moodys-places-Russias-B1-government-bond-

rating-on-review-for--PR_294200

Concurrently, Moody's Interfax has downgraded Belgorod Oblast's issuer

and senior unsecured national scale ratings to 2.ru from 1.ru. The

downgrade was driven by the oblast's deteriorating financial metrics and

its failure to deliver on its budget consolidation plan for 2013.

A full list of affected issuers and credit ratings can be found at the

end of this press release.

Please see ratings tab on the issuer/entity page on moodys.com for

information on Global Scale Rating.

RATINGS RATIONALE

--RATIONALE FOR AFFIRMATION

Moody's has affirmed the national scale ratings of Moscow city, St.

Petersburg city, SUE Vodokanal of St. Petersburg, Moscow Oblast,

Khanty-Mansiysk AO, Samara Oblast, Chuvashia Republic, Komi Republic,

Krasnodar Krai, Krasnoyarsk Krai, Nizhniy Novgorod Oblast, Omsk Oblast,

Vologda Oblast, Mordovia Republic, Krasnodar City, Omsk City and

Volgograd City. The rating action reflects the still-sufficient capacity

of these sub-sovereigns to withstand systemic pressures and to maintain

standalone creditworthiness appropriate for their rating categories.

Moody's notes that these regions demonstrate adequate capacity to manage

short-term refinancing risks, both thanks to the national government's

liquidity access mechanism for regional and local governments (RLGs) --

which helps to offset immediate liquidity pressures -- and ongoing

lending from state-owned banks. Their debt structure, which is absent of

foreign-currency risk (with the exception of Moscow city), and growing

maturities of their local-currency borrowing also help to mitigate

refinancing risks. Finally, the abovementioned Russian sub-sovereigns

have better resilience to global energy price volatility compared with

the Russian government, given their more limited budget dependence on

volatile taxes from the oil and gas sector.

--RATIONALE FOR DOWNGRADE: BELGOROD OBLAST

Moody's decision to downgrade Belgorod Oblast's issuer and debt ratings

to 2.ru from 1.ru reflects the region's rapidly deteriorating

financial metrics and its failure to deliver on its budget consolidation

plan for 2013. The region recorded a -12.6% financing deficit in 2013,

while its debt grew to 71.9% of operating revenue from 57.4% in 2012.

Moody's notes that this has been driven by the substantial progressive

decline in the oblast's corporate income tax proceeds, which followed

the recent departure of a large regional corporate taxpayer (due to

changes in the national corporate income tax regime), and the pressure

weak steel and iron ore prices put on the financials of other key

regional taxpayers from the industry.

WHAT COULD CHANGE THE RATINGS UP/DOWN

--AFFIRMED RATINGS

For all affirmed ratings, downward pressure may arise from the rapid

deterioration in their financial metrics, leading to increasing

idiosyncratic risks. Further material growth in systemic risk, as

reflected in a weakening sovereign credit profile, may also adversely

impact these sub-sovereign ratings.

In turn, upward pressure for non a.ru issuers will be determined by

improving individual financial profiles of the abovementioned

sub-sovereigns, such as significant debt reduction and/or structurally

balanced budgets and improving liquidity position.

--BELGOROD OBLAST

Should Belgorod Oblast fail to contain its financing deficit, which will

lead to further growth in its net direct and indirect debt ratio towards

80% of operating revenue, Moody's would consider downgrading the rating.

Should the region prove capable of decreasing its debt exposure and

containing financing deficits at low single-digit levels, Moody's would

consider stabilising the rating.

RATINGS AFFECTED

Moscow, City of: issuer rating of a.ru affirmed.

Petersburg, City of: issuer and debt ratings of a.ru affirmed.

SUE Vodokanal of St. Petersburg: issuer rating of a.ru affirmed.

Belgorod, Oblast of: issuer and debt ratings downgraded to 2.ru from

1.ru.

Krasnodar, Krai of: issuer and debt ratings of 1.ru affirmed.

Khanty-Mansiysk AO: issuer rating of a.ru affirmed.

Samara, Oblast of: issuer and debt ratings of 1.ru affirmed.

Chuvashia, Republic of: issuer and debt ratings of 2.ru affirmed.

Komi, Republic of: issuer and debt ratings of 2.ru affirmed.

Krasnoyarsk, Krai of: issuer rating of 2.ru affirmed.

Moscow, Oblast of: issuer rating of 2.ru affirmed.

Nizhniy Novgorod, Oblast: issuer rating of 2.ru affirmed.

Omsk, Oblast of: issuer rating of 2.ru affirmed.

Vologda, Oblast of: issuer rating of 3.ru affirmed.

Mordovia, Republic of: issuer and debt ratings of A1.ru affirmed.

Krasnodar, City of: issuer rating of 2.ru affirmed.

Omsk, City of: issuer rating of 3.ru affirmed.

Volgograd, City of: issuer rating of 3.ru affirmed.

The sovereign action required the publication of this credit rating action

on a date that deviates from the previously scheduled release

date in the sovereign release calendar, published on www.moodys.com.

Specific economic indicators as required by EU regulation are not

applicable for these entities.

On 27 March 2014, a rating committee was called to discuss the ratings of

Russian sub-sovereign entities. The main points raised during the

discussion were: The systemic risk in which the issuers operate has

materially increased.

The principal methodology used in rating Russia RLGs was Regional and

Local Governments published in January 2013. The principal methodology

used in rating Russia GRIs was Government-Related Issuers: Methodology

Update published in July 2010. Please see the Credit Policy page on

www.moodys.com for a copy of these methodologies

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Publication:EMBIN (Emerging Markets Business Information News)
Geographic Code:4EXRU
Date:Apr 3, 2014
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