Russian City of Ufa Outlook Now Positive On Expected Sound Budgetary Performance And Liquidity; Affirmed At 'BB-/ruAA-'
May 19, 2011 Standard & Poor's
• The city of Ufa has accumulated cash reserves and we expect the city to benefit from additional transfers from the Republic of Bashkortostan in the medium term.
• We are revising our outlook on Ufa to positive from stable and affirming the 'BB-' long-term and 'ruAA-' national scale ratings.
• The positive outlook reflects our view that Ufa's budgetary performance and liquidity position will be relatively sound in 2011-2013.
MOSCOW (Standard & Poor's) May 19, 2011--Standard & Poor's Ratings Services said today that it had revised its outlook on the Russian City of Ufa to positive from stable. At the same time, the 'BB-' long-term issuer credit and 'ruAA-' Russian national scale ratings were affirmed. The recovery rating on the city's unsecured debt remains unchanged at '3'.
The outlook revision reflects our expectation of Ufa's relatively sound budgetary performance, low debt service, and sound cash levels.
The City of Ufa is the administrative center of the Republic of Bashkortostan (BB+/Positive/--) in the Urals Federal District of the Russian Federation (foreign currency, BBB/Stable/A-3; local currency, BBB+/Stable/A-2; Russia national scale, 'ruAAA').
The ratings on Ufa reflect our view of its limited financial flexibility, owing to its dependence on federal and regional authorities' decisions, modest wealth levels, and high capital-expenditure requirements. However, we assume Ufa's debt burden will remain modest in the medium term, and, if necessary, the city is likely to receive additional financial support from Bashkortostan.
The positive outlook reflects our expectation that Ufa's budgetary performance and liquidity position will be relatively sound in 2011-2013. It also incorporates our expectation of higher transfers from Bashkortostan, which would allow the city to partly alleviate expenditure pressures while keeping its debt burden low.
We could raise the ratings if Ufa's budgetary performance exceeds our base-case forecast, and the city maintains its currently sound cash position and debt service below 5% of adjusted operating revenues in 2011-2013, with more visibility on its liquidity policy.
We could revise the outlook to stable if the city's liquidity position remains volatile and accumulated cash reserves are gradually depleted in line with our base-case scenario, for example, due to loosening financial discipline and weaker budgetary performance.
Company — Ufa
Full nameUfa (Bashkortostan republic)