Fitch affirms Ryazan Region 'B+' ratings with 'negative' outlook
LONDON. Feb 10 (Interfax) - International rating agency Fitch has affirmed its long-term national and foreign currency issuer default ratings for Ryazan Region at 'B+', the region's short-term foreign currency issuer default rating at 'B,' and its long-term national scale rating at A(rus), with an outlook of 'negative for the long-term ratings, Fitch said in a press release.
"The ratings reflect the region's elevated debt levels, which are one of the highest among Fitch-rated Russian local and regional governments. Fitch expects further growth of the region's direct risk in 2014-2016, which will exceed 80% of current revenue by end-2014. At end-2013 the region's direct risk reached 75% of current revenue (2012: 72%)," Fitch said.
"Fitch estimates Ryazan region's immediate refinancing needs as substantial because 44% or 10.8 billion rubles of direct risk matures in 2014. The agency does not expect the region to face difficulties in refinancing. However, should the financial markets worsen the region will have to rely on assistance from the federal government.
"Fitch believes that federal government election pledges to raise public sector salaries will continue to fuel growth of operating expenditure in 2014, while revenue growth will not return to pre-2012 levels due to the economic slowdown. The region's preliminary estimates show overall deficit widening to 18% in 2013 (2012: 12%) and a lower operating surplus at 2.4% (2012: 4.3%).
"Ryazan Region's debt coverage and debt servicing ratios are at unsustainable levels due to its low operating surpluses. This implies the region may have to service part of its debt with new borrowings. Fitch forecasts that these ratios will remain weak in the foreseeable future.
The region's economy is modest in the national context but is fairly diversified and benefits from close proximity to Moscow, the country's capital. Gross regional product per capita was 84% of the national median in 2011," Fitch said..
"Direct risk exceeding 80% of current revenue or inability to post a sufficient operating balance to cover interest payments would lead to a downgrade," the agency said.
