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I AGREE
16 Dec 2010
Moscow, December 16, 2010 -- Moody's Investors Service has today downgraded the foreign and local
currency issuer ratings of the Vologda Oblast (Russia) to Ba2 from Ba1.
The outlook on the ratings has been changed to stable from negative.
Separately, Moody's has also changed the outlook to stable
from negative for the ratings assigned to Nizhniy Novgorod Oblast (Ba2),
Belgorod Oblast (Ba1) and Tatarstan Republic (Ba1). Moody's
also affirmed the foreign and local currency issuer ratings of the Saratov
Oblast (Ba2); the outlook remains negative.
Separately, Moody's Interfax Rating Agency has today downgraded
the national scale rating (NSR) of the Vologda Oblast to Aa2.ru
from Aa1.ru. Moody's Interfax also affirmed the long-term
NSRs of Belgorod Oblast (Aa1.ru), Nizhniy Novgorod Oblast
(Aa2.ru), Saratov Oblast (Aa2.ru). NSRs carry
no specific outlook.
RATINGS RATIONALE
Vologda Oblast - Moody's one-notch downgrade of the
Vologda Oblast reflects rapid growth in its market borrowing in 2009-2010
and an expected further increase in its debt burden going forward.
"Notwithstanding the post-recessionary recovery in the regional
economy and some resumption in tax revenue, the region has not been
able to adjust its spending in order to avoid substantial operating and
financing deficits," explains Alexander Proklov, a Moody's
Vice President, Senior Analyst and lead analyst for Russian sub-sovereigns.
Persistent challenges -- particularly the volatility that characterises
the region's tax proceeds given its high concentration on one large
taxpayer -- will also exert adverse pressure on the credit profile
of Vologda Oblast.
The outlook on Vologda's Ba2 rating has been changed to stable,
based on the regional government's clear intention to introduce
fiscal consolidation measures beyond 2011, supporting a gradual
decline in debt ratios to moderate levels in the medium term. "Moody's
anticipates that the regional government's willingness to improve
its budget strategy will be supported by some diversification in the local
economy and, therefore, steady growth in the region's
tax base," adds Mr Proklov.
Tatarstan Republic, Nizhniy Novgorod Oblast, Belgorod Oblast
- The changes in outlook to stable from negative for the ratings
of the Tatarstan Republic, Nizhniy Novgorod Oblast and Belgorod
Oblast reflect these regions' improving financial positions.
"Despite persistent rigidity on the expenditure side of the regional
budgets and some uncertainty with regard to budget plans, these
regions have displayed significant improvements in their key financial
ratios compared with the recessionary deterioration witnessed in H1 2009,"
says Mr. Proklov. According to Moody's, the
debt burdens of these entities remain at levels appropriate for the rating
category, while market conditions are currently favourable for refinancing
of existing debt.
Saratov Oblast - Moody's has retained the negative outlook
on Saratov Oblast's ratings following the recent substantial growth
in the region's direct debt and persistent operating and financing
deficits. "In 2009-2010, the regional government
incurred some additional social expenditure payments, while its
revenue stream remained insufficient to fully fund these responsibilities,"
explains Mr. Proklov. Nevertheless, outstanding debt
is currently at levels that are appropriate for the rating category.
Moreover, Saratov's government has forecast a very low financing
deficit in 2011 and does not envisage any additional debt growth.
"Moody's will continue to monitor Saratov's debt policy
and liquidity profile over the next 9-12 months to ensure the adequacy
of the policy response to existing budget pressures," adds
Mr. Proklov.
Overall, Moody's notes that the federal financial support
provided in 2009 and 2010 (in the form of transfers and budget loans),
as well as enhanced federal oversight have facilitated the transition
of Russian sub-sovereigns to a post-crisis environment.
Since H2 2009, most Russian sub-sovereigns have shown some
improvements in their budgetary performances, largely thanks to
the wider economic recovery and favourable commodity prices. Stabilisation
and streamlining of the sub-sovereign debt is also common,
although there are some exceptions. Nevertheless, the expected
gradual withdrawal of federal support may pose some risks, particularly
with regard to sub-sovereigns with weak liquidity positions and
high refinancing needs. Moody's will continue to monitor the situation
in the Russian sub-sovereign sector closely to estimate the possible
repercussions of federal consolidation measures.
The previous rating actions that Moody's implemented on these Russian
sub-sovereigns are as follows:
Vologda, Oblast of: the outlook on the oblast's global
scale local and foreign currency ratings of Ba1 was changed to negative
from stable on 5 June 2009.
Belgorod, Oblast of: the outlook on the oblast's global
scale local and foreign currency ratings of Ba1 was changed to negative
from stable on 5 June 2009.
Nizhniy Novgorod, Oblast of: the outlook on the oblast's
global scale local currency rating of Ba2 was changed to negative from
stable on 5 June 2009.
Saratov, Oblast of: the outlook on the oblast's global
scale local currency ratings of Ba2 was changed to negative from stable
on 5 June 2009.
Tatarstan, Republic of: the outlook on the republic's
global scale foreign currency rating of Ba1 was changed to negative from
stable on 5 June 2009.
The principal methodologies used in these ratings were "Regional and Local
Governments Outside the US" published in May 2008, and "The Application
of Joint Default Analysis to Regional and Local Governments" published
in December 2008.
Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are
intended as relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global scale
ratings in that they are not globally comparable with the full universe
of Moody's rated entities, but only with NSRs for other rated debt
issues and issuers within the same country. NSRs are designated
by a ".nn" country modifier signifying the relevant
country, as in ".ru" for Russia. For further
information on Moody's approach to national scale ratings, please
refer to Moody's Rating Implementation Guidance published in August 2010
entitled "Mapping Moody's National Scale Ratings to Global Scale
Ratings."
ABOUT MOODY'S AND MOODY'S INTERFAX
Moody's Interfax Rating Agency (MIRA) specializes in credit risk analysis
in Russia. MIRA is controlled by Moody's Investors Service,
a leading provider of credit ratings, research and analysis covering
debt instruments and securities in the global capital markets.
Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE:
MCO).
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
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independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Moscow
Alexander Proklov
Vice President - Senior Analyst
Sub-Sovereign Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
Milan
Mauro Crisafulli
Senior Vice President
Sub-Sovereign Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
Moody's Eastern Europe LLC
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
Moody's downgrades Vologda Oblast to Ba2 stable; Outlook on Belgorod Oblast, Nizhniy Novgorod Oblast and Tatarstan Republic changed to stable
No Related Data.
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