(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: Samara City - Rating Action
LONDON/MOSCOW/MILAN, August 22 (Fitch) Fitch Ratings has revised
City of Samara's Outlook to Positive from Stable. The agency has
region's Long-term foreign and local currency Issuer Default
Ratings (IDRs) at
'BB', National Long-term rating at 'AA(rus)' and its Short-term
IDR at 'B'.
KEY RATING DRIVERS
The Outlook revision reflects the following rating drivers and
Fitch expects Samara's budgetary performance to stabilise at the
level with margins averaging 15% in 2014-2016. A strong
underpins a high self-financing capacity for capex and should
lead to a
narrowing of the deficit before debt variation to a low 1%-2% of
in 2014, from 5.4% in 2013.
The city's operating balance reached a strong 15.7% of operating
revenue in 2013
(2012: 12.5%). This improvement was partly driven by a positive
net effect of
reallocation of expenditure responsibilities and revenue sources
municipal and regional budgets during 2012 and 2013.
Fitch expects the city's direct risk to remain low at 35% of
(RUB6.9bn) by end-2014, slightly up from 32% (RUB6bn) a year
earlier. The city
intends to limit debt growth and has budgeted close to a zero
fiscal balance for
2015-2016. This should lead to the debt stock stabilising at 33%
revenue by 2016. Contingent risk is low as the city does not
guarantees and its public sector entities are self-sufficient.
Despite a low debt burden Samara mostly relies on short-term
bank loans for
deficit financing. The city's direct risk stock as of 1 August
2014 was 77%
composed of bank loans with less than one year to maturity.
short-term nature of loans, contracted from local banks, exposes
the city to
refinancing risk, it is mitigated by the city's strong
committed lines of credit with local banks. Outstanding cash and
credit lines amounted to RUB3,375m as of 1 August 2014 and fully
loans due in 2H14.
The city also plans to contract a RUB2bn revolving bank credit
line with up to
three-year maturity by end-2014. If the placement takes place it
part of the city's outstanding one-year bank loans and mitigate
Samara's ratings also reflect the following key rating drivers:
The city is the capital of Samara Region, which has a
economy, based on a strong industrial sector. Local companies'
performance supports Samara's strong fiscal capacity,
contributing 67% of
operating revenue in 2013. Samara receives an insignificant
amount of financial
aid in the form of general-purpose grants from the region as its
is higher than that of other municipalities in the region.
The city's self-financing capacity is strong with capital
revenue and the
current balance on average covering 90% of annual capex in 2013.
is high relative to national peers. It accounted for 30% of
total spending in
2013 (2012: 27%) as the city continuously funded development
expects the city's capex to gradually decline to 21%-23% of
during 2013-2015 following a decline in capital transfers from
Russia's institutional framework for subnationals is a
constraining factor on
the LRGs' ratings. Frequent changes in allocation of revenue
assignment of expenditure responsibilities between the tiers of
the region's forecasting ability and negatively affect its
fiscal stability and
Narrowing of the deficit before debt variation leading to
stabilisation of the
overall debt burden at below 40% of current revenue, coupled
maintenance of sound budgetary performance in line with Fitch's
would be positive for the ratings.
+7 495 956 9901
Fitch Ratings CIS Ltd
26 Valovaya Street
+7 495 956 9965
+39 02 87 90 87 203
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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 23 April 2014, are available on
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria
(Outside the United
States) â€“ Effective Apr. 19, 2011 to Mar. 5, 2012
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