Credit-Rating Assigns City of Zhytomyr "uaBBB"
OREANDA-NEWS. December 14, 2007. Credit-Rating, a nationally recognized credit rating agency in Ukraine has today assigned a long-term credit rating of uaBBB to the city of Zhytomyr. The agency has also assigned a long-term credit rating of uaBBB to City's UAH20m 3-year upcoming coupon bonds issue. The outlook on both ratings is Stable. In the course of analysis Credit-Rating considered City's social-economic and financial indicators for 2002-2006 and 1H2007 as well as other inside information furnished by the company.
An obligor or a debt liability with uaBBB credit rating is characterized with the SUFFICIENT creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is affected by adverse changes in commercial, financial and economic conditions.
"Stable" outlook indicates that there are no anticipated reasons to change the rating in the course of the year.
Factors maintaining the credit rating:
The City's budget incomes excl. transfers grew in the past 2 years, specifically, annual incomes in 2005-2006 exceeded over 35 per cent those of previous years with such a trend retained in 2007.
The sustained growth of City's key figures in 2003-2006, in fact the industrial production sales rose 2.2x to UAH1.8bn; the investments in fixed capital increased 2.8x to UAH476.5m, the retail turnover grew 2.3x to UAH1bn. Such growth tendency has retained over 1H2007. Sustained low registered unemployment rate, which remained more than 2x lower than that national average during 2005-2006 and 1H2007. The City enjoys absence of a direct debt (as of Dec. 1, 2007) with its modest planned growth: the estimated budget's debt burden in case the bond issue is placed in full, will account for 8 per cent of the budget amended incomes for 2007 excl. transfers.
Factors constraining the credit rating:
City budget's dependency upon transfers from the State budget, in fact the leveling subsidies account for 14.2 per cent of the amended planned budget incomes excl. transfers (22.8 per cent in 2006) according to the amended annual plan.
The monthly average salary is 9.5 per cent lower than the national average with the City's dependency upon gains from individuals' tax (the specific gravity of this income source in the City budget excl. transfers makes up more than 70 per cent).
The majority of City"s per capita figures were lower than those national averages over the past 5 years, in fact according to 1H2007 indicators the industrial production sales is 1.6x lower, the export turnover is 2.2x lower, the foreign investments is 2.7x lower and the investments in fixed capital is 26 per cent lower.
High deterioration of main funds, including the home sector, utilities and transport infrastructure, which requires significant investments for their renovation coupled with high population's arrears for utilities services as of Jul.1, 2007.