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Fitch Rates City of Moscow RUB5bn Bond at 'AAA(rus)'

February 06, 2008 | Сbonds

Fitch Ratings-London/Moscow- 6 February 2008: Fitch Ratings has today assigned the City of Moscow issue of a RUB5bn domestic bond with a maturity of nine years and six months a National Long-term 'AAA(rus)' rating. The city is rated Long-term foreign and local currency 'BBB+', Short-term foreign currency 'F2', and National Long-term 'AAA(rus)'. The Outlooks for the Long-term foreign and local currency and National Long-term ratings are Stable.

The ratings reflect continued growth in Moscow’s strong and dynamic local economy, supported by further improvements in the economy of the Russian Federation. They also factor in the city’s large current surpluses and a high capacity for debt financing. On the other hand, the ratings take into account Moscow’s exposure to unhedged foreign currency debt and potential pressure on operating expenditure from social spending and public salary increases.
Moscow has consistently reported an economic performance above the national average. In 2006, gross city product (GCP) grew 9% compared with national average GDP growth of 7.4%, a trend that continued into 2007. Given the large proportion of dynamic taxes - such as personal and corporation tax - in Moscow’s budget, the health of the local economy has a direct impact on the city’s budget revenue. Moscow still has considerable expenditure flexibility. Capital expenditure accounted for some 40% of total expenditure in 2007, leaving plenty of room to manoeuvre in the event of an economic downturn.

A prudent borrowing policy has resulted in strong debt coverage ratios and a good debt-servicing record; debt-to-current revenue has been declining since a peak of 26% in 2003 to about 8% in 2007. Bonds form the bulk of the city’s debt, while the foreign currency component is diminishing. Given Moscow’s projected revenue growth, debt ratios against operating revenue and the current balance will remain manageable and modest by national and international standards.

The City of Moscow is the capital of the Russian Federation and its economic and financial centre. The city accounted for 21% of Russia's GDP in 2006, a much higher proportion than its 7.2% share of the country's population.

Issue: Moscow, 49

StatusCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
redeemedRussia06/14/201714,055,759,000 RUB-/NR/-

Company: Moscow

Full company nameCity of Moscow
Country of riskRussia
Country of registrationRussia


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