OREANDA-NEWS. On 23 May 2008 Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it assigned a long-term credit rating of uaA to coupon bonds to be issued by Kharkiv city council (`city`). The amount of the issue is UAH505m, with 5-year original maturity. In the course of analysis Credit-Rating considered city`s social-economic and financial indicators for 2004-2007 as well as its other inside information.

An obligor or a debt liability with uaA credit rating is characterized with the HIGH STRONG creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is susceptible to adverse changes in commercial, financial and economic conditions.

Factors maintaining the credit rating

High liquidity of city budget: as of Apr. 1, 2008, the amount of remaining temporarily free budget funds, including those deposited with banks amounted to UAH153.5m in the general fund and to UAH172.5m in the special-purpose fund.

Stable growth in 2004-2007 of city`s key economic indicators: the amount of foreign direct investments grew 4.3x to USD969.9m; the fixed capital investments rose 3.6x to UAH6.5bn; the export goods turnover increased 2.4x to USD2.1bn; the retail turnover advanced 3.4x to UAH10.8bn; the homes delivered grew 2.4x to 337.3K sq.m. These indicators calculated per capita, in 2007 exceeded the national averages.

Key figures of city`s social development have improved in 2004-2007: the unemployment rate of 0.7% is far lower than the national average of 2.4%, accompanied by increase in wages.

Factors constraining the credit rating

The direct debt burden on city`s budget incomes in 2008 exclusive of transfers (of a. 25%), in case the city`s new issue of internal bonds is placed in full, is planned to rise.

The monthly average salary is lower than the national median coupled with its growing arrears (if compared with the wage growth) in 2006-2007, coupled with the budget incomes being dependant upon gains from individuals tax: the specific gravity of this source in the budget`s general fund excluding transfers grows annually and accounted for 70.2% in 2007.

High deterioration of city`s fixed assets, including the housing sector, utilities and transport infrastructure which requires significant investments for their renovations, coupled with high population`s per capita arrears for utilities services.