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Ukrainian City of Dnipropetrovsk Ratings Affirmed At 'B' and 'uaA-'; Outlook Stable

September 18, 2012 | Standard & Poor's

• The Ukrainian city of Dnipropetrovsk continues to deliver strong operating margins in line with our base case, thanks to economic growth and state support.
• Despite existing and planned borrowing, tax-supported debt is likely to stay low.
• We are affirming our 'B' and 'uaA-' ratings on Dnipropetrovsk and the recovery rating on the city's bond is unchanged at '4'.
• The stable outlook reflects our view that city's adherence to cautious expenditure and debt policies and continued central-government support will likely result in moderate budgetary performance and low tax-supported debt.

MOSCOW (Standard & Poor's) Sept. 17, 2012--Standard & Poor's Ratings Services said today that it had affirmed its 'B' long-term issuer credit rating and 'uaA-' Ukraine national scale rating on the Ukrainian city of Dnipropetrovsk. The outlook is stable. The recovery rating on Dnipropetrovsk's senior unsecured debt remains at '4'.

The ratings on Dnipropetrovsk reflect Ukraine's very weak public finance system, which results in low financial flexibility and predictability for the city, as well as material contingent liabilities related to municipal utilities and a poor and concentrated economy. These constraints are mitigated by Dnipropetrovsk's low debt burden and strong financial support from the central government.

The stable outlook reflects our expectation, according to our base-case scenario, that despite a possible slowdown in economic growth and tax revenues, Dnipropetrovsk's adherence to cautious expenditure policies, coupled with continued central-government support, will likely result in operating surpluses above 5% and only modest deficits after capital accounts over the medium term. It also reflects the city's low tax-supported debt and debt service in 2012-2014.

We would likely take negative rating actions on Dnipropetrovsk if operating expenditures, weaker revenues, or the municipal companies' financial positions put additional stress on the city's operating performance, resulting in sustained operating deficits and a weaker liquidity position. The deterioration of the city's liquidity resulting from short-tem debt accumulation could also put pressure on the rating.

We could take positive rating actions if the city displayed stronger budgetary performance in line with our up-side scenario, in particular when combined with a clear and structural reduction of the payables of the city's GREs. In the longer run, positive rating actions will likely depend on the city formally adopting debt and liquidity policies, coupled with improvements in Ukraine's institutional framework. Ratings upside would also depend on our rating actions on Ukraine.

Company: City of Dnipro

Full company nameDnipro City
Country of riskUkraine
Country of registrationUkraine


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