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 6% of Russia’s total GRP.
KEY ASSESSMENT FACTORS
Low current and projected debt load. According to ACRA's estimates, in 2022–2023, the City's debt will remain lower than 25% of current revenues, which is an indication of the low debt load on the City's budget, as per ACRA’s methodology. The averaged1 debt to GRP ratio will be below 3%.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
As of September 1, 2022, the debt included bonds due in 2022–2028 (94%) and budget loans (6%). Debt service costs are not burdensome for the City's budget. Given the low debt load, the risk of debt refinancing in 2022 and 2023 is minimal.
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. The City earns additional income to cover its debt service costs by managing idle budget funds.
As of August 1, 2022, the City's idle budget funds were more than five times higher than average monthly budget expenditures in the seven months of 2022. To manage its liquidity effectively, the City uses funds of autonomous and budget institutions, and it does not need to borrow short-term loans from the Federal Treasury Department to cover cash gaps. The liquidity ratio, as per ACRA's methodology, may amount to 78%.
Balanced budget structure and sufficient budget discipline. The City’s budget is highly self-sustainable. For 2019–2023, the averaged ratio of tax and non-tax revenues (TNTR) to internal revenues, excluding subventions, should amount to 97%. Capital expenditures should average to more than 20% of total expenditures, excluding subventions, for the aforementioned period. In 2019–2023, the averaged current account balance to current revenues ratio should equal 18%, and the ratio of the averaged modified budget deficit to current revenues should amount to -4%. These indicators show that current revenues are sufficient to cover current expenditures and indicate the need for borrowing to finance capital expenditures.
The City's budget law provides for a budget deficit of 9% of TNTR in 2022, which is planned to be covered by new bond issues. According to ACRA's estimates, the actual budget deficit in 2022 should be significantly lower than the planned one, so that the need to borrow commercial loans should not arise.
Over the seven months of 2022, the total revenues have grown by 58% y-o-y, while TNTR have grown by 61% y-o-y. Expenditures increased by 10%, and the intermediate budget deficit amounted to RUB 296 bln.
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 1.5 times. 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 2018–2021 did not exceed 17%. Unemployment remains consistently low and did not exceed 3% in the aforementioned period. The average monthly wage was almost six times higher than the City’s subsistence minimum in 2021.
KEY ASSUMPTIONS
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Budget execution in 2022 and 2023 as outlined in the budget law;
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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 highly likely remain unchanged within the 12 to 18-month horizon.
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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, 2021, and December 17, 2021, 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.
