ACRA assigns А+(RU) to (RegS RU34010SVS0) bond issued by the Sverdlovsk Region

Credit rating rationale. The bond issue of the Sverdlovsk Region listed below is being is placed in line with Decree of the Government of the Sverdlovsk Region No. 975-PP “On setting a maximum volume for placements of government bonds of the Sverdlovsk Region” dated December 25, 2019 (as amended by Resolution of the Government of the Sverdlovsk Region No. 437-PP dated June 25, 2020).

The aforementioned bond issue is not envisaged by the 2020 Program for Government Internal Borrowings of the Sverdlovsk Region or the planned period of 2021 and 2022 (Appendix 14 to Law of the Sverdlovsk Region No. 120-OZ “On the regional budget for 2020 and the planned period of 2021 and 2022” dated December 12, 2019 (as amended by Law of the Sverdlovsk Region No. 38-OZ dated April 21, 2020)). The program provides for the placement of RUB 22 bln of government securities in 2020. The Ministry of Finance of the Sverdlovsk Region has already placed this volume of bonds this year (issues RU000A101Z17 and RU000A101UG7).

Article 2 of Law of the Sverdlovsk Region No. 45-OZ “On the suspension of certain provisions of the Regional Law ‘On the budget process in the Sverdlovsk Region’ and on the specifics of executing the regional budget in 2020” dated June 10, 2020 allows the Ministry of Finance of the Sverdlovsk Region to carry out government internal borrowing on the basis of decisions of the Government of the Sverdlovsk Region in excess of the indicators set by the above program.

In addition, Article 1 of Law of the Sverdlovsk Region No. 45-OZ “On the suspension of certain provisions of the Regional Law ‘On the budget process in the Sverdlovsk Region’ and on the specifics of executing the regional budget in 2020” dated June 10, 2020 suspends the need to draw up certain appendices to the Law on the Regional Budget, in particular, the Program for Government Internal Borrowings.

In addition, Sub-clause 2 of Clause 4 of Article 1 of Federal Law No. 103-FZ “On amendments to the Federal Law ‘On the suspension of certain provisions of the Budget Code of the Russian Federation and the establishment of specifics of the execution of the federal budget in 2020’" dated April 1, 2020 allows a region of the Russian Federation (in accordance with the decision made by its supreme executive body of state power) to amend the consolidated budget list of its budget without amending its budget law in the event of redistribution of budget allocations between the sources for financing the budget deficit of this region of the Russian Federation.

Part of the budget deficit of the Sverdlovsk Region is planned to be financed by placing a bond loan (RegS RU34010SVS0) instead of taking out bank loans, as previously assumed. Therefore, within the framework of the above laws, budget allocations are redistributed between sources for financing the budget deficit of the region without changing the size of the declared deficit and without exceeding the upper limit of government internal debt as of January 1, 2021 (RUB 100.4 bln).

In ACRA’s opinion, the bond listed below issued by the Sverdlovsk Region is a senior unsecured debt instrument, and its credit rating is equivalent to the credit rating of the Sverdlovsk Region, i.e. A+(RU).

Key issue properties:

Issue volume

RUB 10 bln

ISIN/RegS

- /RU34010SVS0

Placement start date/maturity date

November 24, 2020/November 23, 2024

Regulatory disclosure

The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.

A credit rating has been assigned to the government securities (RegS RU34010SVS0) issued by the Sverdlovsk Region for the first time. The credit rating is expected to be revised within 182 days following the publication date of this press release as per the Calendar of planned sovereign credit rating revisions and publications.

The credit rating was assigned based on the data provided by the Sverdlovsk Region. The credit rating is solicited, and the Government of the Sverdlovsk Region participated in its assignment.

No material discrepancies between the provided data and the data officially disclosed by the Government of the Sverdlovsk Region in its financial statements have been discovered.

ACRA provided no additional services to the Government of the Sverdlovsk Region. No conflicts of interest were discovered in the course of credit rating assignment.

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