Kyiv, July 18 (Interfax-Ukraine) – Standard Poor’s Ratings Services on July 18, 2012, affirmed its ‘CCC+’ long-term issuer credit and ‘uaBB’ Ukraine national scale ratings on the Ukrainian city of Lviv, SP has said in a statement.
The outlook is stable.
According to SP, the affirmation reflects the rating agency’s base-case expectation that the city will repay its July 20 Ukrainian hryvnia (UAH) 50 million bond (about $6 million), extend a UAH 11.7 million loan due July 20, and accumulate sufficient cash in advance in a special fund to repay a UAH 42 million bond due in December 2012. To do so, the city will continue to sell assets, as it did in anticipation of the July 20 bond repayments.
The ratings reflect Lviv’s low financial flexibility within Ukraine’s system of interbudgetary relations and ongoing expenditure pressures. The city’s “very negative” liquidity and what SP sees as a weak credit culture, reflected in nonpayment on guarantees, also constrain the ratings, as do its low wealth levels in an international context.
Lviv’s modest debt service and debt, and its importance as one of western Ukraine’s commercial centers, with a diversified economic structure, help offset these negatives.
The stable outlook reflects SP’s expectation that Lviv will repay its UAH 50 million bond due on July 20 with sufficient cash accumulated on its special funds, will extend the loan due July 20 by that date, and will later accumulate enough cash in its special fund to make debt repayments in December 2012. SP also expects the city to borrow only modestly, keeping direct debt within 15% of operating revenues until 2014, and that liquidity for interest payments will be available via treasury loans.
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