Fitch affirms Yaroslavl Region at 'BB-'; Outlook Stable
MOSCOW. Nov 16 (Interfax) - Fitch Ratings has affirmed the Russian region of Yaroslavl's Long-term foreign and local currency ratings at 'BB-' respectively, while affirming the region's Short-term foreign currency rating at 'B'. The agency has also affirmed its National Long-term rating at 'A+(rus)'. All the Long-term rating Outlooks are Stable, the agency said in a press release.
The ratings reflect the region's revenue concentration in few companies - some of which are cyclical businesses - and the considerable amount of debt maturities over the next 12 months. The ratings also factor in the region's satisfactory budgetary performance, supported by ongoing federal aid and prudent fiscal management. The Stable Outlooks reflect Fitch's expectation that slow recovery of the local economy, federal current and capital transfers, and sound fiscal management will continue to support the region's operating revenue, leading to consolidation of its budgetary performance. They also reflect the agency's expectations that the region will be able to refinance its maturing direct debt obligations in Q409 and Q110.
The Yaroslavl Region reported satisfactory budgetary performance in 2008, with the operating balance increasing to 13.4% of operating revenue (2007: 12.2%). Effective control over operating expenditure allowed the region to narrow deficit before debt variation to 3.2% of total revenue by end-2008 from 4.6% in 2007. The region's capex increased to 22.9% of total spending in 2008 (2007: 16.1%), due to federal investments in the region's capital's preparation for its 1000th anniversary, scheduled for 2010.
The region's direct risk stabilised at 40.1% of current revenue in 2008 (2007: 41.4%), while the payback ratio improved to less than four years from four and a half years in 2007. However, the region's direct risk profile is relatively short-term with repayments of RUB1.7bn in Q409 and RUB6.4bn by end-2010. Debt maturing in Q409 and in Q110 is fully covered by cash reserves, federal budget loan and stand-by credit lines secured by the region. The region's contingent liabilities are immaterial and limited to the fully self-servicing debt of its public companies; while prudent debt management practices should help to keep debt coverage ratios at a satisfactory level in 2009-2010.
The region's industrial economy provides strong tax capacity and the per capita gross regional product (GRP) was 11% above the median of Russian regions in 2007. However, the contraction of cyclical industries depressed tax revenue in 2008 and in Q109. Nonetheless, this is mitigated by federal transfers, which increased to 19.3% of operating revenue in 2008 from 15.4% in 2007. Although fiscal concentration of the region is significant, tax revenue from the top 10 companies as a share of total revenue collected decreased to 24.6% in 2008 from 31.5% in 2007.
The Yaroslavl region is located in the northern part of European Russia. It accounts for 0.9% of the national population (2007) and its GRP represents 0.9% of the national GDP.