(The following statement was released by the rating agency)
LONDON/MOSCOW/FRANKFURT, April 11 (Fitch) Fitch Ratings has
Tula Region's Long-term foreign and local currency Issuer
Default Ratings (IDRs)
at 'BB', with Stable Outlooks, and its Short-term foreign
currency IDR at 'B'.
The agency has also affirmed the region's National Long-term
'AA-(rus)' with Stable Outlook.
The region's outstanding RUB8.5bn senior unsecured domestic
(ISINs RU000A0JT1G2, RU000A0JUAC9) were also affirmed at 'BB'
KEY RATING DRIVERS
The ratings reflect Tula's satisfactory operating performance,
increasing direct risk and a well-diversified economy, but also
coverage exceeding its debt maturity profile and the overall
modest scale of its
Fitch expects Tula's operating balance will be supported by
further expansion of
the region's tax base and will remain sufficient to cover
interest expenses in
2014-2016. In 2013 the operating balance improved to 5.4% of
from 3% in 2012, due to increase of both taxes and current
transfers from the
federal budget. However, growth of capex led to the widening of
before debt variation to almost 11% of total revenue in 2013
from 5.4% in 2012.
The deficit was fully financed by new debt.
Fitch expects Tula's direct risk to remain moderate in the
medium-term, in the
range of 38%-43% of current revenue between 2014 and 2016. This
an increase from 30% in 2013 and 22% in 2012. The growth of
direct risk in 2013
exceeded Fitch's expectations due to higher capex stemming from
implementation of the region's gasification programme, and
extension of support
to businesses investing in the regional economy.
Tula's direct risk maturity profile, which stretches to 2017,
was shorter than
its debt payback ratio of 7.5 years in 2013. Fitch does not see
matching the region's average maturity profile over the medium
term, leaving it
exposed to refinancing risk. The region is, however, free of
liabilities, which is credit-positive.
Fitch views the region's immediate refinancing risk as moderate.
For 2014 the
region faces RUB2bn of maturing domestic bonds, which correspond
to 14% of total
direct risk. The region will decide later in the year on its
of issuing another domestic bond if market conditions are
contracting a commercial bank loan. The region is also
negotiating with the
federal Finance Ministry on contracting subsidised budget loans,
allow savings on future interest payments.
The ratings are weighed down by the evolving nature of the
framework for local and regional governments (LRGs) in Russia.
It has a shorter
track record of stable development than many of its
international peers. The
predictability of Russian LRGs' budgetary policy is constrained
continuous reallocation of revenue and expenditure
The region has a modest but growing economy. The regional
economy is diversified
and has a well-developed processing industry. Nevertheless, the
economic profile is still weaker than the national average
despite its economic
growth outpacing the national average. Tula's GRP increased 3.4%
exceeding the national growth of 1.3%. The administration
expects the regional
economy will continue to outperform the national average in
Operating balance improvement close to 10% of operating revenue
consecutive years accompanied by debt payback being in line with
will lead to positive rating action.
Conversely, inability to maintain stable operating performance
with an operating
margin above 5% resulting in weak debt payback exceeding 10
years would lead to
+7 495 956 99 65
Fitch Ratings CIS Ltd
26 Valovaya Street
+7 495 956 99 01
+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 at www.fitchratings.com.
Applicable criteria, 'Tax-Supported Rating Criteria', dated 14
August 2012, and
'International Local and Regional Governments Rating Criteria
States', dated 9 April 2013, are available on
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria
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