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 constrained by economic indicators that are somewhat below the national average.

The Region is located in the Volga Federal District and ranked 11th in Russia by 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. The Region’s debt to current income ratio may increase from 30% as of the end of 2019 to 34–35% as of the end of 2020 due to a potential decline in tax and non-tax income (TNTR) and new borrowings to finance the deficit stipulated by the Region’s budget law. According to ACRA’s assessment, in 2021 the aforementioned ratio should be lower than 43%, which corresponds to a moderately low debt load. As of October 1, 2020, the Region’s debt structure was dominated by bonds (64%), while the rest was budget loans (36%). As a result, the annual amount of repayment (refinancing) does not exceed 16% of the current debt (no more than RUB 7.9 bln). The average1 level of interest expenses in 2017–2021 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.

Moderately high degree of budget self-sufficiency with flexible budget expenses. The 2020 regional budget law stipulates an 8% decline in TNTR compared to 2019 and executing the budget with a deficit of about 15% of TNTR. The Region plans to finance the deficit using funds accumulated in previous years and by increasing its debt load. According to ACRA, despite the possible reduction in TNTR in 2020, sufficiently flexible budget expenses will allow the Region to execute its budget with a deficit lower than the abovementioned level.

For eight months of 2020, the income of the regional budget was 8% higher than in the same period in 2019 due to growth in transfers from the federal budget. The Region’s TNTR declined by 7%, mainly due to reduced income tax revenues. The regional budget was executed with an interim surplus of RUB 11 bln for the first eight months of 2020.

The average share of TNTR in the Region’s total revenues (excluding subventions) in 2017–2021 should exceed 82%. According to ACRA’s methodology, the average ratio of the balance of current operations to current income for this period should be 11%, with the ratio of the average modified budget deficit to current income at -3%. These indicators indicate that the Region’s current income can cover current expenses and that funds will need to be borrowed to finance capital expenses. Average capital expenses in 2017–2021 should amount to 20% 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. As of October 1, 2020, funds placed by the Region in bank deposits exceeded average monthly budget expenses for eight months of 2020 by 1.4 times. The Region’s management of temporarily free budget funds allows the budget to receive additional revenues and partially offset the costs of debt servicing.

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 10% compared to 2019, followed by 2% growth in 2021;
  • Reduction in expenses if actual revenues are lower than the targets;
  • Maintaining a conservative debt policy;
  • Maintaining high budget liquidity.

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 debt to current income ratio that is consistently below 30%.

A negative rating action may be prompted by:

  • Higher current expenses of the budget without a corresponding increase in income;
  • Substantial decrease in liquidity of the regional budget;
  • Debt load increasing above 45% of current income.

Issue ratings

The Samara Region, 35013 (ISIN RU000A0JXT41); maturity date: May 31, 2024, issue volume: RUB 10 bln — AA(RU).

The Samara Region, 35010 (ISIN RU000A0JUQP7); maturity date: July 1, 2021, issue volume: RUB 12 bln — AA(RU).

The Samara Region, 35012 (ISIN RU000A0JWM56); maturity date: June 21, 2024, issue volume: RUB 10 bln — AA(RU).

The Samara Region, 35014 (ISIN RU000A0ZZ9P8); maturity date: June 4, 2026, issue volume: RUB 8 bln — AA(RU).

The Samara Region, 35015 (ISIN RU000A1020L5); maturity date: August 4, 2026, issue volume: RUB 5 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 have been assigned to the Samara Region and the bonds (ISIN RU000A0JXT41, RU000A0JUQP7, RU000A0JWM56, RU000A0ZZ9P8, RU000A1020L5) 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 for the Russian Federation.

The credit ratings assigned to the Samara Region and the bonds (ISIN RU000A0JXT41, RU000A0JUQP7, RU000A0JWM56, RU000A0ZZ9P8, RU000A1020L5) issued by the Samara Region were published by ACRA for the first time on December 28, 2016, June 5, 2017, July 7, 2017, July 7, 2017, June 6, 2018, and August 3, 2020, respectively. The credit ratings assigned to the Samara Region and the bonds (ISIN RU000A0JXT41, RU000A0JUQP7, RU000A0JWM56, RU000A0ZZ9P8, RU000A1020L5) 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 were assigned based on the data provided by the Government of the Samara Region, 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 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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