December 1, 2017 / 9:09 PM / a year ago

Fitch Affirms Russian Belgorod Region at 'BB'; Outlook Stable

(The following statement was released by the rating agency) MOSCOW, December 01 (Fitch) Fitch Ratings has affirmed Russian Belgorod Region's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BB' with Stable Outlook and Short-Term Foreign-Currency IDR at 'B'. The region's outstanding senior unsecured domestic debt has been affirmed at 'BB'. KEY RATING DRIVERS The ratings reflect Belgorod's sound operating performance, moderate direct risk and strong self-financing of capex as well as a well-diversified economy. The ratings also take into account the region's exposure to contingent risk and a weak institutional framework for Russian subnationals. Fitch expects the region will continue to demonstrate sound budgetary performance with an operating balance close to 14% of operating revenue over the medium-term (2016: 12.1%). This will be supported by expansion of the region's diversified tax base and prudent management aimed at operating cost control. The region's deficit will remain moderate and be around 3% of total revenue in 2017-2019, in line with the 2014-2016 average. During 8M17 Belgorod collected 65% of revenue budgeted for the full year and incurred 61% of budgeted expenditure for 2017, which led to an interim budget surplus of RUB2 billion as of 1 September. The revenue collection was supported by tax increases, particularly corporate income tax, which benefited primarily from the improved financial results of the region's metallurgic sector. Despite an interim budget surplus, Fitch expects the region to report a full-year deficit, albeit at no more than 3%, due to seasonal acceleration of spending. Fitch expects the region will maintain capex at around 15% of total spending over the medium-term, in line with 2016. This is higher than for many domestic peers as the regional administration prioritises infrastructure development in the region. Belgorod's self-financing capacity of capex will remain high in 2017-2019, with the current balance and capital revenue covering around 80% of capex. This will limit the region's recourse to new borrowings. Fitch expects the region's direct risk will remain moderate by international standards, at below 55% of current revenue over the medium-term (2016: 55.8%) while the direct risk-to-current balance ratio will be close to five years (2016: almost seven years). As of 1 November 2017, direct risk was dominated by domestic bonds at 52%, followed by low-cost budget loans (33%). The reminder is medium-term bank loans. In June 2017 the region issued a RUB4 billion amortising domestic bond due in 2024, extending and smoothing its maturity profile, which contrasts favourably to most national peers'. The weighted average life of debt increased to 4.3 years as of 1 November 2017 from 3.5 years as of 1 April 2017. Refinancing needs for end-2017 are limited to the repayment of RUB1.4 billion, which is comfortably covered by the region's liquidity of RUB7.5 billion. The region's contingent liabilities have continued to decline but remain material. In 2016, contingent liabilities accounted for RUB9.5 billion or around 15% of current revenue versus 25% in 2014. Most of these are guarantees (RUB7 billion) that the region provided to support regionally important enterprises. In addition, Fitch views RUB3.8 billion of debt at public unitary enterprise Obldorsnab as direct risk as Belgorod subsidises the company for principal and interest payments on this loan. Belgorod has a well-diversified economy based on agriculture, metal and mining and food processing, with GRP per capita at 135% of the national median in 2015. According to the administration, the regional economy continued to outperform the national one in 2016, with GRP up 3.5% while Russia's GDP contracted 0.2%. The administration expects the regional economy will grow 3.5%-4% over the medium-tern versus Fitch's projection of 2%-2.2% annual growth for the national GDP tin 2017-2019. The region's credit profile remains constrained by a weak institutional framework for Russian local and regional governments (LRGs), which has a shorter record of stable development than many of their international peers. Weak institutions lead to lower predictability of Russian LRGs' budgetary policies, which are subject to the federal government's constant reallocation of revenue and expenditure responsibilities within government tiers. RATING SENSITIVITIES Consolidation of sound budgetary performance with an operating margin above 10% accompanied by improvement of the direct risk-to-current balance ratio to about five years could lead to an upgrade. Deterioration of budgetary performance leading to a consistently weak operating balance that is insufficient to cover interest expenses could lead to a downgrade. Contact: Primary Analyst Victoria Semerkhanova Associate Director +7 495 956 99 65 Fitch Ratings CIS Ltd 26 Valovaya Street Moscow 115054 Secondary Analyst Vladimir Redkin Senior Director +7 495 956 24 05 Committee Chairperson Guido Bach Senior Director +49 69 768076 111 Fitch has made a number of adjustments to the official accounts to make the local and regional government internationally comparable for analytical purposes. These adjustments include: - Transfers of capital nature received were re-classified from operating revenue to capital revenue; - Transfers of capital nature disbursed were re-classified from operating expenditure to capital expenditure. - Goods and services of capital nature were re-classified from operating expenditure to capital expenditure. - The debt of Obldorsnab was re-classified from the debt of public sector entities to the direct risk of the region - The interest payments on the debt of Obldorsnab were added to the region's interest payments Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on 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 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