OREANDA-NEWS. On 31 March 2008 Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it assigned a long-term credit rating of uaBBB+ to unregistered interest-bearing bonds (series 1-B) to be issued by Lutsk city council (`City`). The amount of the issue is UAH30m, with a 5-year original maturity. In the course of analysis Credit-Rating considered City`s social, economic and financial indicators for 2002-2007 as well as its other inside information.

An obligor or a debt liability with uaBBB credit rating is characterized with the SUFFICIENT creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is affected by adverse changes in commercial, financial and economic conditions. A plus + and a minus - signs indicate intermediary categories compared to the standard categories (grades).

Factors maintaining the credit rating

The incomes (excluding transfers) in the budget`s general fund has been growing at rapid rates over the past 3 years, specifically the amount of incomes in 2005, 2006, and 2007 exceeds 30.4, 35.1, 51 percent respectively those of the previous budget periods.

Low City`s direct debt burden as of Jan. 1, 2008 (3.7 percent of the budget incomes excluding transfers) with its moderate growth expected further: the debt burden will make up 14.7 percent of the budget incomes planned for 2008, had the issue is placed in full.

The majority of City`s key figures grows and exceed that national averages, namely the industrial production sales added 54 percent, the fixed-capital investments advanced by 22 percent, the retail sales increased 4 times.

The City`s key social development indicators have improved over 2002-2006 and 9M2007, namely the number of employees (excluding small businesses) grew by 21.4 percent to 80.5K, which accounts for 38.9 percent of the City`s overall population, accompanied by low unemployment rate of 1.4 percent, which is lower than that national of 2.1 percent.

Factors constraining the credit rating

The City is dependant upon transfers from the State budget, namely leveling subsidies, which ratio to budget`s incomes (excl. transfers) made up 12.5 percent in 2007.

The monthly average wage in the City for 9M2007 is 11.6 percent lower than that national average accompanied by budget incomes` dependency upon gains from individuals` tax, with this source accounting for 78 percent of the budget incomes (excl. transfers).

High deterioration of City`s fixed assets, including the housing sector, utilities and transport infrastructure, which requires significant investments for their renovations.