OREANDA-NEWS. November 30, 2015. Fitch Ratings has upgraded the City of Kharkov's Long-term foreign currency Issuer Default Ratings (IDR) to 'CCC' from 'C'. A full list of rating actions is at the end of this commentary.

Under EU credit rating agency (CRA) regulation, the publication of International Public Finance reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from this in order to comply with their legal obligations.

Fitch interprets this provision as allowing us to publish a rating review in situations where there is a material change in the creditworthiness of the issuer that we believe makes it inappropriate for us to wait until the next scheduled review date to update the rating or Outlook/Watch status. In this case the deviation was caused by the sovereign upgrade.

Following the upgrade of Ukraine's Long-term foreign currency IDR on 18 November 2015 (see 'Fitch Upgrades Ukraine's Foreign-Currency IDR to 'CCC'' dated 18 November 2015 at www.fitchratings.com) we have taken a similar rating action on the city as it is rated at the same level as the sovereign.

The next scheduled review date for the City of Kharkov will be determined at a later stage in December 2015 when Fitch will publish its Sovereign and Local and Regional Governments Rating Review Calendars for 2016.

KEY RATING DRIVERS
The City of Kharkov's ratings are capped by the sovereign. The weak institutional framework governing Ukrainian subnationals remains a constraint on the city's ratings. The city is currently free from external debt obligations and it continues to record a satisfactory budgetary performance.

The rating drivers of the cities' Long-term local currency IDRs are unaffected, leading to their affirmation.

RATING SENSITIVITIES
The city's ratings are constrained by the sovereign. A downgrade of the sovereign's ratings would lead to a corresponding action on the city's IDR. In the absence of a sovereign downgrade, significant deterioration of Kharkov's credit profile could also lead to negative rating action.

A sovereign upgrade could be reflected by Kharkov's ratings provided that the city maintains a stable budgetary performance.

The rating actions are as follows:

- Long-term foreign currency IDR: upgraded to 'CCC' from 'C'
- Long-term local currency IDR: affirmed at 'CCC'
- Short-term foreign currency IDR: affirmed at 'C'