Actions follow confirmation of Russia's government bond rating
London, 26 April 2016 -- Moody's Investors Service ("Moody's") has today
confirmed the ratings of 7 Russian regional and local governments (RLGs)
and 2 government-related issuers (GRIs) and downgraded the ratings
of Republic of Mordovia to B3 from B2. At the same time it has
affirmed the ratings of 10 Russian regions and cities; and will withdraw
the ratings of 1 region. The outlooks on all these ratings are
negative. Today's actions conclude the review that Moody's initiated
on 9 March 2016.
These rating actions follow no material change of Russia's credit profile
as captured by Moody's confirmation of Russia's Ba1 government bond rating
with negative outlook on 22 April 2016. For additional information,
please refer to the related announcement: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_347453.
Specifically, Moody's has confirmed the following ratings with a
negative outlook: the cities of Moscow and St. Petersburg,
SUE Vodokanal of St. Petersburg, OJSC Western High-Speed
Diameter, Republic of Bashkortostan, Republic of Tatarstan,
Autonomous-Okrug (region) of Khanty-Mansiysk, Oblast
of Moscow and Oblast of Omsk.
Concurrently, Moody's has affirmed the ratings with negative outlooks
of Oblast of Samara, Chuvashia Republic, Krasnoyarsk Krai,
Krasnodar Krai, Republic of Komi, Oblast of Nizhniy Novgorod,
City of Krasnodar, City of Volgograd, City of Omsk and Oblast
of Belgorod. Moody's will withdraw the ratings of Oblast of Belgorod
due to insufficient information.
A detailed list of the affected issuers and ratings is provided at the
end of this press release.
RATINGS RATIONALE
--- RATIONALE FOR THE CONFIRMATIONS OF 7 RLGs' AND
2 GRIs' RATINGS
The confirmation of the ratings on the cities of Moscow and St.
Petersburg directly follows the confirmation of the sovereign bond rating,
given their institutional and macroeconomic linkages to the national government
which could potentially limit their strong individual performances.
The confirmation of the issuer ratings of SUE Vodokanal of St.
Petersburg and senior unsecured rating of OJSC Western High-Speed
Diameter reflects their status as GRIs, wholly owned by the St.
Petersburg government and their strong credit linkages with the City of
St. Petersburg.
The confirmation of OJSC Western High-Speed Diameter's bond rating
reflects its link with the City of St. Petersburg and the guarantee
that the Russian government provides on its bond principal payments.
The confirmation of ratings of Republic of Bashkortostan, Republic
of Tatarstan, Autonomous-Okrug (region) of Khanty-Mansiysk,
Oblast of Moscow and Oblast of Omsk reflects no material increase in systemic
pressure as reflected in the confirmation of the sovereign bond rating.
--- RATIONALE FOR DOWNGRADE ON RATINGS OF THE REPUBLIC
OF MORDOVIA
The Republic of Mordovia's ratings downgrade reflects its:
1) significantly increased debt burden and 2) consistently weak fiscal
performance. The net direct and indirect debt to operating revenues
ratio increased to 121% at end-2015 from 90% at end-2014
as the republic has had to finance its large budget deficit (26%
of total revenues in 2015) and will likely continue to trend upward.
The performance has been consistently weak and no significant improvement
is expected. The gross operating balance has been negative for
the last seven years (-4% of operating revenues in 2015).
--- RATIONALE FOR AFFIRMATION OF 7 REGIONS' AND 3
CITIES' RATINGS
The affirmation of the ratings of 10 RLGs (Oblast of Samara, Chuvashia
Republic, Republic of Komi, Krasnodar Krai, Krasnoyarsk
Krai, Oblast of Belgorod, Oblast of Nizhniy Novgorod,
City of Krasnodar, City of Omsk and City of Volgograd) reflects
Moody's assessment that these regions' fiscal performances
are adequate for their rating categories. 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.
--- RATIONALE FOR ASSIGNING NEGATIVE OUTLOOKS
The negative outlooks on the ratings of the cities of Moscow and St.
Petersburg mirror the negative outlook on the sovereign government bond
rating. The outlooks reflect the cities' institutional and macroeconomic
linkages with the federal government and their lack of special status,
which prevents them from being rated above the sovereign.
The negative outlooks on the ratings of SUE Vodokanal of St. Petersburg
reflect its strong institutional, financial and operational linkages
with the city of St. Petersburg.
The negative outlook on the rating of OJSC Western High-Speed Diameter
mirrors the negative outlook on the City of St. Petersburg and
the sovereign government bond rating.
The negative outlook on the ratings of another 16 RLGs (Republic of Bashkortostan,
Republic of Tatarstan, Autonomous-Okrug (region) of Khanty-Mansiysk,
Oblast of Moscow, Oblast of Samara, Chuvashia Republic,
Oblast of Omsk, Krasnoyarsk Krai, Krasnodar Krai, Republic
of Komi, Oblast of Nizhniy Novgorod, City of Krasnodar,
City of Volgograd, City of Omsk, Republic of Mordovia and
Oblast of Belgorod) reflects the potential for the further deterioration
of these issuers' credit profiles in an environment of increased systemic
risk. In addition, the potential for a further weakening
of the sovereign's creditworthiness, as reflected in the negative
outlook on the government bond rating, could affect the federal
government's willingness and ability to provide on-going and extraordinary
support to regional and local governments.
--- RATIONALE FOR OBLAST OF BELGOROD RATINGS WITHDRAWAL
Moody's will withdraw the ratings on Oblast of Belgorod because of inadequate
information to monitor the rating, due to the issuer's decision
to cease participation in the rating process. Please refer to the
Moody's Investors Service Policy for Withdrawal of Credit Ratings available
on its website, www.moodys.com.
The regional government has not communicated any additional information
to Moody's since November 2015. At the same time, the publicly
available information is not sufficient to analyse the refinancing risks
and budgetary performance, and to make reliable assumptions about
future performance.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Given the negative outlooks, an upgrade of the RLG's and GRI's ratings
is unlikely. If systemic pressures abate, the negative outlook
for the Ba1 and Ba2 rated RLGs and 2 GRIs will likely be changed to stable,
provided there is no deterioration in the RLGs' and GRIs' performances.
For other entities the outlooks could stabilise following improvements
in their performance leading to the stabilisation of their debt burden
and a decline in refinancing risks.
Further deterioration in the sovereign's credit quality and/or deterioration
in the RLGs' and GRIs' credit profiles reflected in the worsening
fiscal performances and rising debt burdens could exert downward pressure
on these sub-sovereigns.
LIST OF AFFECTED RATINGS
Confirmations with negative outlooks:
Issuer: Moscow, City of
.... LT Issuer Rating, Confirmed at
Ba1
.... BACKED Senior Unsecured, Confirmed
at Ba1
.... Outlook Negative
Issuer: St. Petersburg, City of
.... LT Issuer Rating, Confirmed at
Ba1
.... Senior Unsecured, Confirmed at
Ba1
.... Outlook Negative
Issuer: Moscow, Oblast of
.... LT Issuer Rating, Confirmed at
Ba2
.... Outlook Negative
Issuer: Bashkortostan, Republic of
.... LT Issuer Rating, Confirmed at
Ba2
.... Outlook Negative
Issuer: Khanty-Mansiysk AO
.... LT Issuer Rating, Confirmed at
Ba2
.... Outlook Negative
Issuer: Omsk, Oblast of
.... LT Issuer Rating, Confirmed at
Ba3
.... Outlook Negative
Issuer: Tatarstan, Republic of
.... LT Issuer Rating, Confirmed at
Ba2
.... Outlook Negative
Issuer: SUE Vodokanal of St. Petersburg
.... LT Issuer Rating, Confirmed at
Ba2
.... Outlook Negative
Issuer: OJSC Western High-Speed Diameter
.... BACKED Senior Unsecured, Confirmed
at Ba3
.... Outlook Negative
Downgrade with negative outlook:
Issuer: Mordovia, Republic of
.... LT Issuer Rating, Downgraded to
B3 from B2
.... Senior Unsecured, Downgraded to
B3 from B2
.... Outlook Negative
Affirmations with negative outlooks:
Issuer: Nizhniy Novgorod, Oblast
.... LT Issuer Rating, Affirmed at B1
.... Outlook Negative
Issuer: Komi, Republic of
.... LT Issuer Rating, Affirmed at B1
.... Outlook Negative
Issuer: Krasnoyarsk, Krai of
.... LT Issuer Rating, Affirmed at B1
.... Outlook Negative
Issuer: Samara, Oblast of
.... LT Issuer Rating, Affirmed at Ba3
.... Outlook Negative
Issuer: Krasnodar, Krai of
.... LT Issuer Rating, Affirmed at B1
.... Senior Unsecured, Affirmed at B1
.... Outlook Negative
Issuer: Chuvashia, Republic of
.... LT Issuer Rating, Affirmed at Ba3
.... Senior Unsecured, Affirmed at Ba3
.... Outlook Negative
Issuer: Belgorod, Oblast of
.... LT Issuer Rating, Affirmed at B1
.... Senior Unsecured, Affirmed at B1
.... Outlook Negative
.... Ratings will be withdrawn
Issuer: Omsk, City of
.... LT Issuer Rating, Affirmed at B1
.... Outlook Negative
Issuer: Volgograd, City of
.... LT Issuer Rating, Affirmed at B2
.... Outlook Negative
Issuer: Krasnodar, City of
.... LT Issuer Rating, Affirmed at B1
.... 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$): 26,138 (2014
Actual) (also known as Per Capita Income)
Real GDP growth (% change): -3.7% (2015
Actual) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 12.9%
(2015 Actual)
Gen. Gov. Financial Balance/GDP: -3.5%
(2015 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 5% (2015 Actual) (also known
as External Balance)
External debt/GDP: 38.9%
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 21 April 2016, 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 not materially changed. The Republic of Mordovia's
fiscal or financial strength, including its debt profile,
has materially decreased.
The principal methodology used in rating City of Moscow, Oblast
Nizhniy Novgorod, City of St. Petersburg, Oblast of
Moscow, Republic of Komi, Krai of Krasnoyarsk, Republic
of Tatarstan, Oblast of Samara, Republic of Bashkortostan,
Krai of Krasnodar, Khanty-Mansiysk AO, Republic of
Chuvashia, Oblast of Omsk, Oblast of Belgorod, City
of Omsk, City of Volgograd, City of Krasnodar and Republic
of Mordovia, was Regional and Local Governments published in January
2013.
The principal methodology used in rating SUE Vodokanal of St. Petersburg
and OJSC Western High-Speed Diameter was Government-Related
Issuers published in October 2014.
Please see the Ratings Methodologies 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 credit 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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Moody's considers a rated entity or its agent(s) to be participating
when it maintains an overall relationship with Moody's. On
this basis, Oblast of Belgorod or its agent(s) is considered to
be a participating entity. The rated entity or its agent(s) generally
provides Moody's with information for the purposes of its ratings
process.
The person who approved City of Moscow, Oblast of Moscow,
City of St. Petersburg, OJSC Western High-Speed Diameter,
SUE Vodokanal of St. Petersburg credit ratings is David Rubinoff,
MD-Sub Sovereigns, Sub-Sovereign Group, 44 20
7772 5456, 44 20 7772 5454. The person who approved Republic
of Bashkortostan, Oblast of Belgorod, Republic of Chuvashia,
Khanty-Mansiysk AO, Republic of Komi, City of Krasnodar,
Krai of Krasnodar, Krai of Krasnoyarsk, Republic of Mordovia,
Oblast of Nizhniy Novgorod, City of Omsk, Oblast of Omsk,
Oblast of Samara, Republic of Tatarstan, City of Volgograd
credit ratings is Mauro Crisafulli, Associate Managing Director,
Sub-Sovereign Group, 44 20 7772 5456, 44 20 7772 5454.
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 confirms ratings of 9 Russian sub-sovereigns, affirms ratings of 10; downgrades Mordovia to B3
