The credit rating of Saint Petersburg (hereinafter, the City) is based on the City’s well-developed economy, balanced budget structure, low debt load, and high budget liquidity.
Saint Petersburg is a city of federal importance and home to 3.7% of Russia’s population. The City’s gross regional product is about 5% of Russia’s total GRP.
KEY ASSESSMENT FACTORS
Low current and projected debt load. According to ACRA's estimates, the ratio of City's debt to current ratio may amount to 11% (as per ACRA’s methodology) and in 2022 it may reach 15%. Such ratio indicates a low debt load. As of October 1, 2021, the City’s debt comprised only bond loans due in 2022–2028. Debt service costs are not burdensome for the City’s budget.
Since its debt load is low, the City did not participate in the budget loans program implemented to substitute commercial debt. ACRA expects the City to attract long-term budget loans to finance urban infrastructure development projects.
High budget liquidity. The City fulfills its expenditure obligations on time and regularly deposits temporarily free funds with banks and via repo transactions secured by federal bond loans and the City’s bonds. In the eight months of 2021, the City’s revenues from such transactions amounted to about RUB 1.4 bln.
As of September 1, 2021, the City's temporarily free funds were twice higher than average monthly budget expenditures for eight month of 2021. To effectively manage its liquidity, the City uses funds of autonomous and budget institutions, and it does not need to borrow short-term loans from Federal Treasury Department to cover cash gaps.
Balanced budget structure and sufficient budget discipline. The City’s budget is highly self-sustainable. For 2018–2022, the averaged1 ratio of tax and non-tax revenues (TNTR) to internal revenues, excluding subventions, should amount to 97%. Capital expenditures should average 15% of total spending, excluding subventions, for the aforementioned period. In 2018–2022, the average current account balance to current revenues ratio should equal 10%, and the ratio of the average modified budget deficit to current revenues should amount to -3%. These indicators show that current revenues are sufficient to cover current expenditures and indicate the need for borrowing to finance capital expenditures.
The City Budget Law provides for the 2021 budget deficit of 14% of TNTR. According to ACRA's estimates based on the current budget execution indicators, the deficit may turn out to be significantly less than the above level. For eight months of 2021, the volume of budget revenues grew by 26% y-o-y, the TNTR — by 28% y-o-y, and the expenditures — by 10% y-o-y. The intermediate budget surplus for the period from January to August 2021 amounted to RUB 74 bln, which is nine times higher than in the same period of 2020.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
The City’s highly developed economy provides for a diversified tax base. The per-capita GRP in Saint Petersburg is consistently higher than the national average by 30–50%. Tax revenues are highly diversified by sector: according to ACRA's calculations, the averaged estimate of the maximum share of a single industry in the City’s tax revenues in 2017–2020 did not exceed 16%. Unemployment remains consistently low and did not exceed 3% in the aforementioned period (2017–2020). The average monthly wage was five times higher than the City’s subsistence minimum in 2020.
KEY ASSUMPTIONS
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An 19% increase in the City’s TNTR in 2021 compared to 2020, followed by a 15% increase in 2022;
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Maintaining a conservative debt policy;
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Maintaining a high budget liquidity.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the credit rating will most likely remain unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
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Debt load growing above 30% of the City’s current revenues;
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Significant fall in available liquidity.
ISSUE RATINGS
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).
Saint Petersburg, 35003 (ISIN RU000A102A15); maturity date: April 13, 2027, issue volume: RUB 30 bln — AAA(RU).
Saint Petersburg, 35004 (ISIN RU000A102K88); maturity date: September 28, 2028, issue volume: RUB 30 bln — AAA(RU).
Rationale. In ACRA’s opinion, the bonds of Saint Petersburg are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of Saint Petersburg.
REGULATORY DISCLOSURE
The credit ratings have been assigned to Saint Petersburg and the bonds (ISIN RU000A0ZYHX8, RU000A0ZYKJ1, RU000A102A15, RU000A102K88) issued by Saint Petersburg under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit ratings of Saint Petersburg and the bonds (ISIN RU000A0ZYHX8, RU000A0ZYKJ1, RU000A102A15, RU000A102K88) issued by Saint Petersburg were published by ACRA for the first time on June 27, 2017, December 4, 2017, December 12, 2017, October 22, 2020, and December 17, 2020, respectively. The credit ratings of Saint Petersburg and the bonds (RU000A0ZYHX8, RU000A0ZYKJ1, RU000A102A15, RU000A102K88) 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 sovereign credit rating revisions and publications.
The credit ratings were assigned based on the data provided by Saint Petersburg, 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 Saint Petersburg participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to the Government of Saint Petersburg. No conflicts of interest were identified in the course of credit rating assignment.
