London, 11 June 2021 -- Moody's Investors Service ("Moody's") has today
upgraded the long-term issuer and senior unsecured ratings of Samara,
Oblast of (Samara) to Ba1 from Ba2 and the long-term issuer rating
of Krasnoyarsk, Krai of (Krasnoyarsk) to Ba2 from Ba3. The
outlook on the issuer ratings of Samara has been changed to stable from
positive. The outlook on Krasnoyarsk's issuer rating remains stable.
The rating upgrade of Samara reflects Moody's expectations that
its good budgetary management will enable it to maintain its strong budgetary
metrics and low debt burden. Concurrently the upgrade of Krasnoyarsk
reflects Moody's assessment that the lower appetite to debt will continue
and the region will maintain good budgetary performance supported by tax
A full list of affected ratings is provided towards the end of this press
RATIONALE FOR RATINGS UPGRADE
-- SAMARA, OBLAST OF
The rating upgrade reflects Moody's expectations that the region will
continue to pursue its effective and prudent budgetary policy.
As a result, its debt burden will continue its gradual decline over
the next few years, while operating performance will remain solid,
supported by economic recovery.
Despite pressure on tax revenues from negative economic trends,
Samara achieved a balanced budget in 2020, thanks to ad hoc federal
government transfers and tight grip on operating and capital spending.
Taxes dropped by 3%, offset by ad hoc federal transfers to
compensate for revenue shortfall and additional expenses to address higher
spending related to coronavirus pandemics. On the expenditure side
Samara was able to contain cost growth by employing cuts to non-primary
expenses, such as spending on mass events, exhibitions and
delaying some capital projects. The effective anti-crisis
budget measures enabled the administration to preserve its operating performance
at sound level, with gross operating balance to operating revenues
ratio at 8% in 2020. Moody's expects that the current
economic recovery translating into stronger revenues will bring Samara's
gross operating balance to operating revenue ratio to historically high
levels (above 11-12%) in 2021 and thereafter.
As a result, the region's net direct and indirect debt declined
to 26% of operating revenues in 2020 from 30% in 2019,
and is expected to further trend down below 20% in 2022,
which is low by international standards. The region has also improved
its debt structure, increasing the share of longer-term debt
instruments in total direct debt reducing further already low refinancing
Samara's Baseline Credit Assessment was upgraded to ba1 from ba2.
The final issuer rating of Ba1 incorporates a low likelihood of support
from the Government of Russia (Baa3 stable).
-- KRASNOYARSK, KRAI OF
The rating upgrade reflects Moody's expectations that Krasnoyarsk's operating
performance will improve, supported by careful budgetary management
and recovery of its strong economy. Furthermore Moody's expects
the region to reduce its net direct and indirect debt to operating revenue
ratio to 22-24% in 2021 from 29% in 2020 and maintain
it at this modest level in 2022.
Despite pressure on revenues from lower proceeds from its key taxpayers
the region maintained a balanced performance thanks to higher ad-hoc
transfers from the federal government (which increased by 62% in
2020) and tighter control on spending. In 2020, tax revenues
declined by 8% while the region experienced an upward pressure
from coronavirus related expenses. Nevertheless, Krasnoyarsk's
operating performance remained sound, with gross operating balance
to operating revenue ratio at 8% in 2020 that will be further strengthened
above 11% in 2021 and 2022. Positive budgetary results will
enable the region to keep the debt burden constrained.
The refinancing risks are low due to favourable debt profile: annual
debt repayments do not exceed 5% of operating revenues and are
fully covered by the liquidity cushion.
Krasnoyarsk's Baseline Credit Assessment was upgraded to ba2 from ba3.
The final issuer rating of Ba2 incorporates a low likelihood of support
from the Government of Russia.
RATIONALE FOR STABLE OUTLOOKS
The stable rating outlooks reflect Moody's view that the two regions
will continue their conservative budgetary management resulting in strong
operating performances and modest debt burdens while refinancing risks
will remain low in the next 12-18 months.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
For Samara and Krasnoyarsk most part of environmental problems are not
significant for their credit profiles. Majority of the expenditure
for pollution and environmental safety are covered by the Federal Government
or the companies causing negative externalities. Although environmental
problems including air, water and land pollution are discussed and
accounted in the policy of the regional authorities, environmental
expenditures comprise less than 5% of the budget expenditure.
Negative effects on Krasnoyarsk's tax revenues from weaker financial results
of its key taxpayer (MMC Norilsk Nickel, PJSC (Baa2 negative)) which
will suffer from fines it has to pay for its pollution case will likely
be compensated by the central government.
For Krasnoyarsk and Samara social risks exist but are not significant.
Income inequality, migration and urbanisation, and aging demographic
trends are present in Russia. Samara is less divergent from average
salary and demographic trends. The strong economy of Krasnoyarsk
ensures salaries which are above country average and positive migration.
For the two regions, governance factors are material for the ratings.
Prudent management policies and debt reduction policy allowed for a decrease
in credit risks in recent years. Conservative budget planning and
long-term expenditure plans allow these governments to consolidate
their budgets and reduce debt.
The specific economic indicators, as required by UK 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$): 27,903 (2020
Actual) (also known as Per Capita Income)
Real GDP growth (% change): -3% (2020 Actual)
(also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 4.9%
Gen. Gov. Financial Balance/GDP: -4.1%
(2020 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: 2.3% (2020 Actual) (also
known as External Balance)
External debt/GDP: 31.5% (2020 Actual)
Economic resiliency: ba1
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
SUMMARY OF MINUTES FROM RATING COMMITTEE
On 8 June 2021, a rating committee was called to discuss the ratings
of Krasnoyarsk, Krai of and Samara, Oblast of. The
main points raised during the discussion were: The issuers'
governance and/or management, have materially increased.
The issuers' fiscal or financial strength, including its debt profile,
has materially increased.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlooks on Krasnoyarsk's and Samara's ratings indicate that
a change in the ratings is unlikely in the near term. Over time,
positive pressure could emerge from a more rapid and pronounced debt reduction
than Moody's currently expects, accompanied by stronger budgetary
performances than in the rating agency's baseline.
At the same time, markedly weaker fiscal and debt metrics for these
sub-sovereigns than Moody's currently expects, could put
downward pressure on their ratings or point to negative outlooks.
An upgrade or a downgrade of the sovereign rating could also exert upward
or downward credit pressure on any of the two regional governments' ratings.
LIST OF AFFECTED RATINGS
Issuer: Krasnoyarsk, Krai of
....LT Issuer Rating, Upgraded to Ba2
....Outlook, Remains Stable
Issuer: Samara, Oblast of
....LT Issuer Rating, Upgraded to Ba1
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Ba1 from Ba2
....Outlook, Changed To Stable From
The principal methodology used in these ratings was Regional and Local
Governments published in January 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1091595.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The weighting of all rating factors is described in the methodology used
in this credit rating action, if applicable.
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
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These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Vladlen Kuznetsov, CFA
Vice President - Senior Analyst
Moody's Investors Service Limited, Russian Branch
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