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Klin Rayon Outlook Revised To Positive; 'B-' Rating Affirmed; National Scale Raised To 'ruBBB'

November 8, 2006
MOSCOW (Standard & Poor's) Nov. 3, 2006--Standard & Poor's Ratings Services
said today it revised its outlook on the Russian Klin Rayon to positive from
stable on high economic and tax base growth, good budgetary performance, and
positive trends in the debt profile. At the same time, the long-term issuer
credit rating on Klin Rayon was affirmed at 'B-'. In addition, Standard &
Poor's raised the Russia national scale rating on the rayon to 'ruBBB' from
'ruBBB-'.

"The ratings on Klin Rayon, located in the Moscow Oblast (BB/Positive/--;
ruAA), are constrained by low financial flexibility and predictability,
continuing uncertainty created by ongoing municipal reform, and weak
liquidity," said Standard & Poor's credit analyst Irina Pilman. "A significant
strength, however, is Klin's favorable location, which helps to attract
investments and maintain high economic growth, resulting in the growth of the
tax base."

The favorable location of the rayon attracts both domestic and foreign
investors, which contribute to its high economic growth rate and
diversification of the local economy. Industrial output increased by a high
8.7% in 2005, and is expected to be more than 8% in 2006-2008. The total
amount of taxes collected on the rayon's territory grew, in nominal terms, by
23% annually in 2005 and 2006. The growing economy could also help to further
increase the wealth level in the rayon, which is now higher than the Russian
average.

"We expect that Klin's rapid economic development will continue," said
Ms. Pilman. "Moreover, we expect that the amount and timeliness of subsidies
from the Moscow Oblast in the next few years will be sufficient for the rayon
to maintain good budgetary performance, and to meet its needs for
infrastructure improvement and increasing public sector salaries."

If the rayon successfully lengthens the maturity on its debt, and if the
financial position of the rayon's municipal companies improve, the ratings
could be raised. A reduction in the rayon's revenues and deterioration in its
debt indicators could lead to the outlook being revised back to stable. The
details of how intergovernmental reform will be implemented will be the key
rating factor for Klin in the long term.
Company — Klin District
  • Registration country
    Russia