S&P revises Novosibirsk ratings outlook to 'positive' from 'stable'
MOSCOW. Nov 11 (Interfax) - Standard & Poor's Ratings Services has revised its outlook on the City of Novosibirsk to positive from stable, the agency said in a press release.
At the same time, S&P affirmed the 'BB' long-term issuer credit rating and the 'ruAA' Russia national scale rating on the city.
"The outlook revision reflects stronger revenues stemming from higher tax receipts and solid grants from Novosibirsk Oblast (not rated), which could result in better budgetary performance for 2011-2012 than we previously expected. We also recognize that the city's continuation of prudent debt policies has translated into further extension of its debt profile," S&P said.
"The ratings on Novosibirsk are constrained by what we see as limited financial flexibility and predictability, and low economic productivity. These constraints are mitigated by Novosibirsk's moderate debt, favorable debt profile, improved revenue growth, reasonable cost controls that stimulate moderate financial performance, and a relatively diverse economy.
The positive outlook reflects a more that 30% likelihood of an upgrade should Novosibirsk's budgetary performance exceed our existing base-case assumptions for 2011-2012 thanks to stronger-than-expected revenue growth. Under this scenario, the city's operating surplus would exceed 5% of operating revenues, whereas its deficit after capital accounts would stay below 4%-5% of total revenues. A stronger performance might also have a positive effect on the city's borrowing needs and result in a lower debt burden.
We would consider a positive rating action if the city's financial performance reaches our upside-case indicators in 2011-2012, which would also likely result in a somewhat lower debt burden. Positive actions would also depend on the city's ability and willingness to institutionalize its cash and liquidity policies, ensuring a structurally stronger and less volatile cash balance.
Our scenario for revising the outlook to stable assumes that the pace of operating spending growth would offset the currently observed revenue growth and lead to the budgetary performance envisaged in our base-case scenario and the stabilization of the debt burden at the existing level."
