(The following statement was released by the rating agency)
Nov 28 - Fitch Ratings has revised the Outlook on Russia's Tula Region to Positive from
Stable and affirmed its Long-term foreign and local currency ratings at 'BB-'. The agency has
also affirmed the region's National Long-term rating at 'A+(rus)' and Short-term foreign
currency rating at 'B'.
Fitch has simultaneously withdrawn all of the region's ratings as the issuer has
chosen to stop participating in the rating process. Accordingly, Fitch will no
longer provide ratings or analytical coverage for the Tula Region.
The Positive Outlook reflects the region's improved budgetary performance in
2011 and Fitch's expectations of its consolidation in 2012-2014. Based on the
region's actual budget execution during January-September 2012 and its updated
three-year financial plans, Fitch forecasts Tula's operating margin will
stabilise at 8% in 2012-2014.
The data on the region's budget execution for M912 is available on the Federal
Treasury of Russia's website. Every month, regions in Russia have to file the
execution to the Ministry of Finance of Russian, and generally Fitch considers
that Russian regions are tightly controlled by the Russian federation.
The Outlook also factors in the region's improved debt metrics. The region's
direct risk decreased to 17% of current revenue in 2011 from 28% of current
revenue in 2010. Fitch forecasts the direct risk below 15% of current revenue in
2012-2104. The maturity profile of the debt improved as well as the region
substituted most of the short-term bank loans with RUB5bn domestic bond due 2015
issued in September 2012. The bond has an amortising structure, which decreases
refinancing risk for the region, which used to be high in the previous years.
The region has a well-diversified local economy. It benefits from proximity to
Moscow, the capital of the Russian Federation. During the past five years, the
region has had stable economic growth outpacing the national average, but the
size of its economy is still below the average. Although its population accounts
for about 1.1% of the national total, the region produces only 0.7% of total
value added production.