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TEXT-Fitch affirms Russia's Ryazan Region at 'B+'
August 21, 2012 / 2:27 PM / 5 years ago

TEXT-Fitch affirms Russia's Ryazan Region at 'B+'

Aug 21 - Fitch Ratings has affirmed Russian Ryazan Region's Long-term
foreign and local currency ratings at 'B+', Short-term foreign currency at 'B'
and National Long-term rating at 'A(rus)'. The Outlooks on the Long-term ratings
are Stable. The rating action also affects the region's outstanding domestic
bonds of RUB2.1bn.

The ratings reflect the region's declining refinancing pressure, expected minor
improvement of the volatile budgetary performance and very low contingent risk
from public sector companies controlled by the region. However, the ratings also
factor in the region's modest economy and relatively high direct risk, in a
national context.

Fitch notes that strengthening of the debt coverage metrics and containment of
the direct risk to current balance ratio at about 6-8 years would lead to an
upgrade. Conversely, deterioration of debt coverage ratios coupled with
increasing refinancing pressure due to the high proportion of short-term bank
loans would lead to a downgrade.

Fitch expects Ryazan region to demonstrate a minor improvement in its budgetary
performance with margins averaging about 8% in 2012-2014. Operating expenditure
will grow in 2012 due to reallocation of healthcare responsibilities to the
regional budget from municipalities. This will be compensated by an increasing
proportion of personal income tax allocated to the region and overall expansion
of the region's tax base due to economic growth. Due to a decline in current
transfers from the federation, the region's operating margin deteriorated to 6%
in 2011 from 10% one year earlier.

Fitch expects Ryazan region's direct risk to increase to RUB17bn by end-2012 or
about 53% of current revenue. Fitch expects the region's capex to decline to
below 20% of total expenditure in 2012-2014, leading to low deficit and
declining borrowing needs. In relative terms, the region's debt will start to
gradually decline in 2013-2014. The region's direct risk increased to 52% of
current revenue or RUB15bn at end-2011 from 40% of current revenue or RUB11.2bn
a year earlier.

Fitch estimates the region's immediate refinancing needs in 2012 as moderate at
about 28% of direct risk as of 1 July 2012, while a year earlier refinancing
risk was about 60% of direct risk. The administration has improved debt
management practices by contracting medium-term bank loans with maturities
spread until 2015. Interest payments decreased to RUB0.8bn in 2011 from RUB1bn a
year earlier, indicating another improvement in debt management.

The region's contingent risk is immaterial and limited to RUB14m indebtedness of
the region's public sector enterprises (PSEs). Consequently, in Fitch's view,
the region's budget faces very low risk stemming from potential financial
difficulties of the PSEs.

The region's economy is not large compared to national peers but is fairly
diversified and benefits from close proximity to Moscow, the country's capital.
Gross regional product increased to 4.6% in 2011 (2010: 4.5%) primarily
supported by growth of industrial output. This positively affected tax revenue

Ryazan Region is located in the centre of the European part of Russia. Its
capital, the City of Ryazan, is located 196km south-east of Moscow. The region
contributed 0.5% of the Russian Federation's GDP in 2010 and accounted for 0.8%
of the country's population.

Additional information is available on The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable criteria, 'Tax-Supported Rating Criteria', dated 14 August 2012, and
'International Local and Regional Governments Rating Criteria outside United
States', dated 17 August 2012, are available on

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
International Local and Regional Governments Rating Criteria - Outside the
United States

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