The credit rating of Saint Petersburg (hereinafter, the City) is based on the City’s well-developed regional economy, balanced budget structure, sufficient budget discipline, low current and projected debt load, and excess budget liquidity.
St. Petersburg is a city of federal importance and home to 3.6% of Russia’s population. The City’s GRP is about 5% of Russia’s total GRP.
Balanced budget structure and sufficient budget discipline. The City’s budget is highly self-sustainable. For 2017–2020, annual internal revenues are expected to average 98%, with mandatory expenses (as defined in ACRA's methodologies) at 72%, and capital expenses at about 19%. For 10M 2019, tax and non-tax revenues (TNTR) increased by 10% compared to same period in 2018. Income tax revenues from the trade sector demonstrated the largest growth. The current version of the 2019 city budget law assumes executing the budget with a 6% TNTR deficit. ACRA believes the actual deficit for 2019 will stay below 3% of TNTR. According to the 2020 budget law draft, the City’s planned budget deficit equals 8% of TNTR. The City plans to finance its 2019 and 2020 deficits by issuing bonds and attracting bank loans.
Low current and projected debt load. If the City executes its 2019 and 2020 budgets with the planned deficits, its debt load will be about 100% of the operating balance at the end of 2020. According to ACRA, the City’s debt to operating balance ratio should be 80%, indicating a low level of risk. As of November 1, 2019, the City's debt was composed exclusively of bond loans totaling RUB 30.1 bln with maturities coming in 2022-2026. There are no refinancing risks in the medium term. Debt service costs for the city budget are not burdensome.
Excess budget liquidity. The City regularly deposits temporarily free funds with banks and fulfills its expense obligations on time. In July 2019, the City began repo operations secured by Federal bond loans as part of liquidity management. As of October 1, 2019, temporarily free funds exceeded debt obligations by 1.2x.
The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
Saint Petersburg, 35001 (ISIN RU000A0ZYHX8); maturity date: May 28, 2025, issue volume: RUB 30 bln — AAA(RU).
Saint Petersburg, 35002 (ISIN RU000A0ZYKJ1); maturity date: December 4, 2026, issue volume: RUB 25 bln — AAA(RU).
Rationale. In ACRA’s opinion, the bonds listed above are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of Saint Petersburg.
The credit ratings were assigned to Saint Petersburg and bonds (RU000A0ZYHX8, RU000A0ZYKJ1) issued by Saint Petersburg under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Regional and Municipal Authorities of the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. In assigning credit ratings to the above bond issues, the Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments under the National Scale of the Russian Federation was also applied.
The credit ratings assigned to Saint Petersburg and the bonds (RU000A0ZYHX8, RU000A0ZYKJ1) issued by Saint Petersburg were first published by ACRA on June 27, 2017, December 4, 2017, and December 12, 2017, respectively. The credit ratings assigned to Saint Petersburg and the bonds (RU000A0ZYHX8, RU000A0ZYKJ1) issued by Saint Petersburg are expected to be revised within 182 days following the publication date of this press release as per the Calendar of planned sovereign credit rating revisions and publications.
The credit ratings are based on data provided by Saint Petersburg City Government, information from publicly available sources (the Ministry of Finance, the Federal State Statistics Service, and the Federal Tax Service), as well as ACRA’s own databases. The credit ratings are solicited, and Saint Petersburg City Government participated in their assignment.
No material discrepancies between the provided data and the data officially disclosed by Saint Petersburg in its financial reports have been discovered.
ACRA provided no additional services to Saint Petersburg City Government. No conflicts of interest were discovered in the course of credit rating assignment and affirmation.
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