Actions follow stabilisation of sovereign creditworthiness
London, 04 December 2015 -- Moody's Investors Service, ("Moody's") has
today changed to stable from negative the outlooks on the ratings of 6
regional and local governments (RLGs) in Russia and 3 government-related
issuers (GRIs), reflecting the improvement in systemic risk.
At the same time, it has affirmed the ratings of these 9 issuers.
Concurrently, Moody's has affirmed the ratings of 10 Russian regions
and 3 cities with negative outlooks.
These rating actions follow the stabilisation of Russia's credit profile
as captured by Moody's change of outlook to stable from negative on Russia's
government bond rating (Ba1) on 3 December 2015. For additional
information, please refer to the related announcement: https://www.moodys.com/research/Moodys-changes-outlook-on-Russias-Ba1-government-bond-rating-to--PR_339462.
Specifically, Moody's has affirmed the ratings of and changed the
outlook to stable on the City of Moscow, City of St. Petersburg,
SUE Vodokanal of St. Petersburg and OOO Vodokanal Finance,
OJSC Western High-Speed Diameter, Republic of Bashkortostan,
Republic of Tatarstan, Autonomous-Okrug (region) of Khanty-Mansiysk
and Moscow Oblast.
Conversely, the ratings of the following regions were affirmed with
negative outlooks due to their vulnerability to negative macroeconomic
and financial pressure stemming from the operating environment:
Samara Oblast, Chuvashia Republic, Oblast of Omsk, Republic
of Komi, Krasnodar Krai, Krasnoyarsk Krai, Belgorod
Oblast, Oblast of Nizhniy Novgorod, Republic of Mordovia,
Vologda Oblast, City of Krasnodar, City of Omsk and City of
Volgograd.
The full list of affected issuers and credit ratings can be found at the
end of this press release.
RATINGS RATIONALE
-- RATIONALE FOR OUTLOOK CHANGE TO STABLE FROM NEGATIVE
AND AFFIRMATION OF 6 RLGs' AND 3 GRIs' RATINGS
The outlook change to stable from negative and affirmations on the ratings
of City of Moscow, City of St. Petersburg, Republic
of Bashkortostan, Republic of Tatarstan, Autonomous-Okrug
(region) of Khanty-Mansiysk and Moscow Oblast follows the strengthening
of Russia's credit profile, as captured in the rating action
on 3 December 2015. It reflects the strong linkages between the
Russian government and the 6 RLGs through institutional, financial
and macroeconomic linkages. We believe that these entities are
able to maintain an adequate fiscal performance despite the still weak
economy, thanks to their: (1) low or moderate level of market
debt; (2) consistently adequate or strong budgetary performance;
(3) relative stability of revenue streams due to strong local economies;
(4) moderate to low refinancing risks.
The affirmation of the issuer ratings with stable outlooks of SUE Vodokanal
of St. Petersburg, the senior unsecured rating of OOO Vodokanal
Finance, and senior unsecured rating of OJSC Western High-Speed
Diameter reflects their status as GRIs fully owned by the St. Petersburg
government and their strong credit linkages with the City of St.
Petersburg.
The affirmation of OJSC Western High-Speed Diameter's bond rating
with stable outlook reflects its link with the City of St. Petersburg
and the guarantee that the Russian government provides on its bond principal
payments.
--RATIONALE FOR AFFIRMATION OF 10 REGIONS' AND 3 CITIES'
RATINGS WITH NEGATIVE OUTLOOKS
The affirmation of the ratings with negative outlooks of 13 RLGs (Samara
Oblast, Chuvashia Republic, Oblast of Omsk, Republic
of Komi, Krasnodar Krai, Krasnoyarsk Krai, Belgorod
Oblast, Oblast of Nizhniy Novgorod, Republic of Mordovia,
Vologda Oblast, City of Krasnodar, City of Omsk and City of
Volgograd) reflects their relative weaknesses in their rating categories.
For these entities Moody's expects intensifying pressure on revenue
growth while growing expenses (albeit at a slower pace) will make it challenging
to maintain balanced budgets, and will likely cause their debt burdens
to increase. Financial markets which lack stability and higher
borrowing costs expose regions to some refinancing and liquidity risks.
Pressure from refinancing risks has partially abated as soft loans from
the central government continue to ease the regions' refinancing
needs. Debt affordability remains adequate and is supported by
ongoing lending from state-owned banks.
--WHAT COULD CHANGE THE RATINGS UP/DOWN
Entities with a stable outlook could experience upward rating pressure
in case of upward changes in the sovereign rating, provided their
budget performances do not deteriorate. For Russian RLGs with negative
outlooks an improvement in their performance leading to the stabilisation
of their debt burden and a decline in refinancing risks could exert upward
rating pressure. Deterioration in the sovereign's credit quality,
and/or deterioration in the credit profiles of sub-sovereigns,
could exert downward pressure.
-- RATINGS AFFECTED
-- THE RATINGS OF THE FOLLOWING 9 ISSUERS WERE AFFIRMED
WITH STABLE OUTLOOK
Moscow, City of: the issuer rating and backed senior unsecured
rating of Ba1 affirmed, outlook changed to stable.
St. Petersburg, City of: the issuer rating and senior
unsecured rating of Ba1 affirmed, outlook changed to stable.
SUE Vodokanal of St. Petersburg: the issuer rating of Ba2
affirmed, outlook changed to stable.
OOO Vodokanal Finance: the backed senior unsecured rating of Ba2
affirmed, outlook changed to stable.
OJSC Western High-Speed Diameter: the backed senior unsecured
rating of Ba3 affirmed, outlook changed to stable.
Bashkortostan, Republic of: issuer rating of Ba2 affirmed,
outlook changed to stable.
Tatarstan, Republic of: issuer rating of Ba2 affirmed,
outlook changed to stable.
Khanty-Mansiysk AO: issuer rating of Ba2 affirmed,
outlook changed to stable.
Moscow, Oblast of: issuer rating of Ba2 affirmed, outlook
changed to stable.
-- THE RATINGS OF THE FOLLOWING 13 ISSUERS WERE AFFIRMED
WITH NEGATIVE OUTLOOK
Samara, Oblast of: issuer rating of Ba3 affirmed, outlook
negative.
Chuvashia, Republic of: issuer rating and senior unsecured
rating of Ba3 affirmed, outlook negative.
Omsk, Oblast of: issuer rating of Ba3 affirmed, outlook
negative.
Komi, Republic of: issuer rating of B1 affirmed, outlook
negative.
Krasnodar, Krai of: issuer rating and senior unsecured rating
of B1 affirmed, outlook negative.
Krasnoyarsk, Krai of: issuer rating of B1 affirmed,
outlook negative.
Belgorod, Oblast of: issuer rating and senior unsecured rating
of B1 affirmed, outlook negative.
Nizhniy Novgorod, Oblast of: issuer rating of B1 affirmed,
outlook negative.
Krasnodar, City of: issuer rating of B1 affirmed, outlook
negative.
Omsk, City of: issuer rating of B1 affirmed, outlook
negative.
Mordovia, Republic of: issuer rating and senior unsecured
rating of B2 affirmed, outlook negative.
Vologda, Oblast of: issuer rating of B2 affirmed, outlook
negative.
Volgograd, City of: issuer rating of B2 affirmed, outlook
negative.
The sovereign action required the publication of this credit rating action
on a date that deviates from the previously scheduled release date in
the sovereign release calendar, published on www.moodys.com.
The specific economic indicators, as required by EU regulation,
are not available for these entities. The following national economic
indicators are relevant to the sovereign rating, which was used
as an input to this credit rating action.
Sovereign Issuer: Russia, Government of
GDP per capita (PPP basis, US$): 24,449 (2014
Actual) (also known as Per Capita Income)
Real GDP growth (% change): 0.6% (2014 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 11.4%
(2014 Actual)
Gen. Gov. Financial Balance/GDP: -1.2%
(2014 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 3.1% (2014 Actual) (also
known as External Balance)
External debt/GDP: 32.2% (2014 Actual)
Level of economic development: Moderate level of economic resilience
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On 02 December 2015, a rating committee was called to discuss the
ratings of the Russian sub-sovereign entities. The main
points raised during the discussion were: The systemic risk in which
the issuers operate has decreased affecting some entities.
The principal methodology used in rating Russia RLGs was Regional and
Local Governments published in January 2013. The principal methodology
used in rating Russia GRIs was Government-Related Issuers published
in October 2014. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
The weighting of all rating factors is described in the methodology used
in this rating action, if applicable.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vladlen Kuznetsov
Vice President - Senior Analyst
Sub-Sovereign Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
David Rubinoff
MD - Sub-Sovereigns
Sub-Sovereign Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's changes outlook to stable on 9 Russian sub-sovereigns; ratings affirmed
