ACRA affirms AA(RU) to the Samara Region, outlook Stable, and AA(RU) to bond issues

The credit rating of the Samara Region (hereinafter, the Region) is based on the Region’s moderately low debt load and its smooth repayment schedule, as well as stable budget and its high liquidity. The rating is limited by economic indicators that are somewhat below the national average.

The Region is located in the Volga Federal District and ranked 11th in Russia in gross regional product (GRP) in 2018. The Region’s population is 3.2 mln people.

Key rating assessment factors

Moderately low debt load with a balanced debt structure in terms of maturities. At the end of 2019, the Region’s debt amounted to 30% of current budget revenues (according to ACRA’s methodology). According to the 2020 regional budget law, the debt load in absolute terms should not change significantly in 2020. According to ACRA, as a result of a possible reduction in the Region’s tax and non-tax revenues (TNTR) in 2020, the ratio of its debt to current income may increase to 34%. The Region’s debt structure is dominated by bonds (about two-thirds), while the rest is budget loans. As a result, the annual amount of repayment (refinancing) does not exceed 18% of the current debt (no more than RUB 8.7 bln). The average1 level of interest expenses in 2016-2020 should be about 2% of total budget expenses excluding subventions, which indicates a low level of risk and that these expenses are not burdensome for the budget.


1 Hereinafter, averages are calculated according to the Methodology for Credit Ratings Assignment to Regional and Municipal Authorities of the Russian Federation.

A moderately high degree of budget self-sufficiency with flexible budget expenses. The 2020 regional budget law stipulates executing the budget with a deficit of about 8% of TNTR, which the Region plans to cover mainly with funds accumulated in previous years. According to ACRA, despite the possible reduction in TNTR in 2020, flexible budget expenses will allow the Region to execute its budget with a deficit lower than the abovementioned level.

The average share of TNTR in total revenues (excluding subventions) in 2016-2020 should be more than 87%. According to ACRA’s methodology, the average ratio of the balance of current operations to current income for this period should be 14%, with the ratio of the average modified budget deficit to current income at 3%. These indicators demonstrate that the Region’s current income can cover current expenses and that there is no need to borrow funds in 2016-2020. Average capital expenses in 2016-2020 should amount to 17% of total budget expenses (excluding subventions).

High level of budget liquidity. The Region regularly places funds in deposits in excess of the average monthly budget expenses for 2019. As of April 1, 2020, funds placed in bank deposits were more than twice the amount of debt obligations due in 2020. The Region’s management of temporarily free budget funds allows the budget to receive additional revenues and partially offset debt-servicing costs.

Diversified economy with developed industry. The Region’s economy is based on manufacturing and oil production (22.0 and 20.8% of GRP in 2018, respectively). The structure of the manufacturing industry in the Region is dominated by vehicle production (42.5% of shipped manufacturing goods in 2018) and chemical production (18.2% of shipped goods). In 2015-2018, the Region’s average GRP per capita was 83% of the national average. In 2019, unemployment in the Region was 3.9%, while the average monthly salary exceeded the regional subsistence minimum by more than three times.

Key assumptions

  • Reduction in TNTR in 2020 by no more than 15% compared to 2019;
  • Reduction in expenses if actual revenues reduce compared to planned figures;
  • Maintaining conservative debt policies;
  • Maintaining account balances that cover more than 30% of the budget’s average monthly expenses.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Reduced lag behind the national average in terms of economic indicators;
  • Achieving a sustainable debt to current income ratio below 30%.

A negative rating action may be prompted by:

  • Executing the 2020 budget with a deficit exceeding 10% of TNTR;
  • Substantial decrease in available liquidity;
  • Increase in debt load above 45% of current revenues.

Issue ratings

The Samara Region, 35013 (ISIN RU000A0JXT41); maturity date: May 31, 2024, issue volume: RUB 10.0 bln — AA(RU).

The Samara Region, 35009 (ISIN RU000A0JU2H5); maturity date: July 31, 2020, issue volume: RUB 8.3 bln — AA(RU).

The Samara Region, 35010 (ISIN RU000A0JUQP7); maturity date: July 1, 2021, issue volume: RUB 12.0 bln — AA(RU).

The Samara Region, 34011 (ISIN RU000A0JVK00); maturity date: June 18, 2020, issue volume: RUB 7.0 bln — AA(RU).

The Samara Region, 35012 (ISIN RU000A0JWM56); maturity date: June 21, 2024, issue volume: RUB 10.0 bln — AA(RU).

The Samara Region, 35014 (ISIN RU000A0ZZ9P8); maturity date: June 04, 2026, issue volume: RUB 8.0 bln — AA(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 the Samara Region.

Regulatory disclosure

The credit ratings were assigned to the Samara Region and bonds (RU000A0JXT41, RU000A0JU2H5, RU000A0JUQP7, RU000A0JVK00, RU000A0JWM56, RU000A0ZZ9P8) issued by the Samara Region 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. To assign credit ratings to the above bond issues, ACRA also applied the Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments under the National Scale of the Russian Federation.

The credit ratings assigned to the Samara Region and bonds (RU000A0JXT41, RU000A0JU2H5, RU000A0JUQP7, RU000A0JVK00, RU000A0JWM56, RU000A0ZZ9P8) issued by the Samara Region were first published by ACRA on December 28, 2016, June 5, 2017, July 7, 2017, July 7, 2017, July 7, 2017, July 7, 2017, June 6, 2018, respectively. The credit ratings assigned to the Samara Region and bonds (RU000A0JXT41, RU000A0JU2H5, RU000A0JUQP7, RU000A0JVK00, RU000A0JWM56, RU000A0ZZ9P8) issued by the Samara Region 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 the data provided by the Government of the Samara Region, information from publicly available sources (Ministry of Finance, Federal State Statistics Service, and Federal Tax Service), as well as ACRA’s own databases. The credit ratings are solicited, and the Government of the Samara Region participated in their assignment.

No material discrepancies between the provided data and the data officially disclosed by the Samara Region in its financial statements have been discovered.

ACRA provided no additional services to the Government of the Samara Region. No conflicts of interest were discovered in the course of credit rating assignment.

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