OREANDA-NEWS  On 27 October Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it assigned a long-term credit rating of uaA- (uaA minus) to the city of Sumy (`city`) and to coupon bonds (series A) to be issued by the city council. The amount of the issue is to be UAH50m, due in 2013. In the course of the rating procedure Credit-Rating considered city`s social-economic and financial indicators for 2003-2007 and 1H2008 as well as other inside information furnished by the city council.

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. A plus "+" and a minus "-" signs indicate intermediary categories compared to the standard categories (grades).

Factors maintaining the credit rating

High growth rates of city budget`s general fund revenues exclusive of transfers recorded over the past 3 years, in fact the revenues were in excess of 27.8% in 2005, of 28% in 2007 and of 44.3% in 2007 as compared to the previous budget periods.

High liquidity of the city budget`s general fund (25.7% as of Jul. 1, 2008) accompanied by no city budget`s dependency upon loans from the general treasury account in 2003-2007 and 1H2008.

Certain city`s 2007 per capita economic development indicators exceeded that averages of the country, namely the industrial production sales were in excess of 9% and the retail turnover of 54.7%.

The city`s key social development indicators have improved over 2003-2007 and 1H2008, specifically the number of employees advanced by 5.2% to 113.2K (exclusive of small businesses), which is 40.9% of the city`s population, coupled with decline in registered unemployment to 1.1% as of Jul. 1, 2008, which is lower than 1.9% nationwide.

The city council does not have direct debt as of Jul. 1, 2008 and its low planned growth: the estimated size of the direct debt burden provided that the bond issue is placed in full, will amount to 13% of the budget revenues approved for 2008 exclusive of transfers.

Factors constraining the credit rating

The monthly average salary in the city in 1H2008 was 4.2% lower than the country`s average accompanied by dependency of the budget revenues upon gains from the individuals` tax: the specific gravity of this source in the city budget`s general fund exclusive of transfers was over 75%.

The city budget dependency upon a single tax-payer SMNPO Frunze OJSC, which contributed a. 12% of the city budget`s general fund exclusive of transfers in 1H2008.

High deterioration of city`s social, transport infrastructures and of housing sector, which require significant investments for their renovations.