OREANDA-NEWS. On 01 July 2008 Credit-Rating, a nationally-recognized credit rating agency in Ukraine announced that it assigned a long-term credit rating of uaBBB- (uaBBB minus) to the city of Ternopil (city). The agency has also assigned a long-term credit rating of uaBBB- (uaBBB minus) to citys upcoming issue of coupon bonds. The amount of the issue is UAH20m, with 4-year original maturity. The outlook on both ratings is stable. In the course of the rating procedure Credit-Rating considered citys social-economic and financial indicators for 2003-2007 as well other inside information furnished by the city council.

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).

Stable outlook indicates that there are no anticipated reasons to change the rating in the course of the year.

Factors maintaining the credit rating

High growth rates of receipts to the city budgets general fund exclusive of transfers in the past 3 years, specifically the receipts were in excess of 27.8% in 2005, 24.3% in 2006, and 40.6% in 2007 as compared to the previous budget periods.

The city council does not have direct debts as of Jan.1, 2008, accompanied by its low planned growth: the city budgets estimated direct debt will account for 7.4% of the 2008 budget revenues, exclusive of transfers had the issue is placed in full.

The citys key figures grew in 2003-2007, specifically the retail turnover of goods rose 2.9x to UAH1,511.7m; the fixed-capitals investments increased 4.3x to UAH857.5m; the volume of homes delivered advanced 2.1x to 126.7K sq.m.

The citys social development indicators improved in 2003-2007, in fact the number of employees (exclusive of small businesses) added 4.2% an amounted to 77.1K, which is 35.5% of the citys overall population accompanied by 3x decrease in salary arrears to UAH1.5m.

Low level of the age index of population (as compared to other Ukraines cities) accompanied by natural growth of citys population within 0.6-0.9K annually.

Factors constraining the credit rating

The city budget remains dependant upon the equalization grants from the State budget.

Low level of monthly average salary (by 18% in 2007 as compared to the countrys average) accompanied by the persisting dependency of the budget revenues upon receipts from individuals tax (the specific gravity of this income source in the revenues of the city budgets general fund exceeds 60%).

Low, as compared to the countrys averages, per capita indicators of economic development, in fact the volume of industrial production sales tumbled 2.2x; the volume of foreign direct investments plunged 5.5x and the fixed-capital investments declined by 3%.

High deterioration of citys utilities and transport infrastructure and of the citys housing sector, which require significant investments for their renovations, coupled with rising overdue populations arrears for the utilities services rendered (by 21.8% to UAH9.5m for the past 3 years).