S&P: Tver Oblast 'BB-/ruAA-' Ratings On CreditWatch Negative On Increasing Short-Term Debt Exposure - 24 Мая 2009 - Новостной портал города Новокузнецка
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S&P: Tver Oblast 'BB-/ruAA-' Ratings On CreditWatch Negative On Increasing Short-Term Debt Exposure
22:24
FRANKFURT (Standard & Poor's) Dec. 23, 2008--Standard & Poor's Ratings Services said today it placed on CreditWatch with negative implications its 'BB-' global scale long-term issuer credit rating and 'ruAA-' Russia national scale rating on Tver Oblast, located in the Russian Federation (foreign currency BBB/Negative/A-3; local currency BBB /Negative/A-2; Russia national scale 'ruAAA').
"The CreditWatch placement reflects higher risks posed by the likely weakening of the oblast’s budgetary performance, combined with its increasing exposure to short-term debt, particularly under the conditions of its forthcoming proposed medium-term bond issue of about Russian ruble (RUR) 2.5 billion," said Standard & Poor'S credit analyst Irina Pilman.
The oblast's management intends to borrow at the best possible conditions by placing its proposed issue as a three-year amortizing bond. However, it is possible that the bond may be issued with a put option in 2009. Should this be the case, and taking into account the rising cost of borrowing, we forecast that debt service would increase to about 18.3% of total revenues in 2009. This would make the oblast excessively exposed to short-term debt refinancing by year-end 2009 for its current rating level. If the bond is placed without a put option, debt service will be 10% of total revenues in 2009, which we would consider manageable.
"We will resolve the CreditWatch once we have obtained more visibility not only on the terms and conditions of the bond, which Tver aims to issue over the coming days, but also on the oblast’s willingness and capacity to adjust its 2009 budget, taking into account the expected sharp decline in revenues," said Ms. Pilman.
If the oblast succeeds in placing its proposed medium-term bond in the coming days without any put options, and if it can also adjust its budget in order to reach a zero operating balance in 2009, we will likely affirm the rating. However, we would likely lower the ratings or revise the outlook if the bond is placed with the put option due in 2009, and/or if adjustments to the 2009 budget prove insufficient to eschew a significant deterioration of financial performance below current levels.
