print 04.06.2007

Press-conference on the upgrade to uaA- of the rating assigned to the city of Odessa

On May 30, 2007 a press-conference on the Odessa`s rating upgrade to uaA- from uaBBB- took place in Interfax-Ukraine information agency.

The journalists` questions were answered by Credit-Rating CEO Stanislav Dubko, Credit-Rating Deputy CEO and the head for rating research department Grigoriy Pererva, head for the Department of Stock activity and Securities of Odessa city council Gennadiy Nechayevskiy, and head for the Financial Department of Odessa city council Svetlana Bedrega.

`I would like to remind that in 2005 Odessa was assigned a speculative-grade rating, yet positive changes have led to upgrade to uaA-` Mr. Dubko said when opening press-conference.

One of the major positive factors bolstering the rating`s upgrade is city`s enhanced direct debt structure and City`s lowered budget`s debt burden to 16.7% from 43.4%, owing to city administration`s sound policy.

`Even if we took into account the future city`s loans, we expect the debt burden to remain moderate of approximately 20-21%, which is a tolerable indicator, including international markets` Mr. Dubko said, `we may also note city budget`s lowered dependence upon transfers from higher-level budgets.

Other positive factors are: city budget`s increased flexibility; retention of positive tendencies of labour market development in 2006 as compared to 2005; further growth in 2006 in a number of economic indicators, specifically of the retail turnover, of investments into fixed capital, of residential premises built, of foreign investments, grown efficiency of city`s land fund utilization and of city-owned objects, in fact the income from land fees grew 1.8 times as compared to 2005, with the rental fee increased by 13.8%.

Among the factors constraining the rating`s upgrade Mr. Dubko noted high deterioration of utility infrastructure, which renovation requires significant investments in line with the population`s indebtedness for utility services grown in 2006.

Head of the Department for Stock activity and Securities of Odessa city council Gennadiy Nechaevskiy stressed that the city`s debt burden is 5 times lower than that of Bucharest, 4 times lower than in Budapest, Vilnius, Kiev, Prague and Sofia.

2007 saw initializing in development of strategic program aimed at creation of investment climate. Such programs of a number of cities in Russia and Europe, namely of Barcelona, are to be used as a sample.

According to Svetlana Bedrega, Head for Financial Department of Odessa stressed that `the budget grew 1.5 times in 2006 as compared to the previous year. We planned for 2007 the 1.3 times growth in the budget incomes including transfers of up to UAH1,830 billion. According to 5 months totals we secured the incomes to city`s general budget fund 34% more than in 2006, which amounts to over UAH50 million.

Among the major factors positively affecting the rating`s upgrade Mrs. Bedrega mentioned the constant work on budget`s filling and extension of income sources.

In fact, according to city council decision, since 2006 the city budget is to receive funds from agreements on right for construction further aimed at development of transport and social infrastructure. 2006 saw UAH77 million of these funds. To compare, 2005 saw UAH64 million, and 2004 saw UAH6 million of them. These incomes are planned for 2007 in the number of up to UAH200 million.

It is also important for the budget incomes that the resources at the city`s disposal would efficiently be used. `To increase incomes from city-owned land plots sold, the land auctions are conducted. The conduction of auctions resulted in 1.2-1.4 times increase in sale price in comparison with the initial price. The sale of land plots on competitive basis allows for significant increase in their price.` Mrs. Bedrega said.

In conclusion of the press-conference Mr. Dubko noted `the positive tendencies in municipal sector, since the majority of our ratings assigned to cities are investment-grade with only 2 of them being speculative-grade. Moreover, the municipal sector has not seen ratings` downgrades so far, which rather often occur in corporate sector, for instance.` Credit-Rating CEO summarized.

For further information, please contact:
Information and analytic department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua