Statement on rating

The Slovak Rating Agency grants to the City of Prešov the following rating :

Long-term local currency rating	BBB+ (stable outlook)
Long-term foreign currency rating	BB+ (stable outlook)
Short-term rating	S2

The granted long-term rating in the category of transactions in Slovak crowns BBB+ (stable outlook) is one degree below the sovereign rating of the Slovak republic (A - stable outlook). In the category of foreign currency transactions the City of Prešov was granted rating BB+ (stable outlook), which is one degree below the sovereign rating of the Slovak republic (BBB - stable outlook). The short-term rating of the City of Prešov is S2, which is the best possible short-term rating for entities reaching long-term rating BBB+.

Rationale:

• Prešov (City of) is situated in the central part of East Slovakia, in the northern part of the basin of Košice, 15 km from the metropolis of East Slovakia Košice). Prešov is the centre of so-called Carpathian Euroregion with underdeveloped technical infrastructure. From the political and administrative point of view is Prešov the seat of the region of Prešov and the district of Prešov which associates 91 municipalities. With the area of 73.14 km2 Prešov is the third biggest Slovak city. With the population of 95 760 inhabitants (as at 31 December 1999) Prešov is the third most populated Slovak city. The representation of industry is diversified, but medium and small enterprises and a large number of entrepreneurs - individuals whereby these enterprises don´t create enough job opportunities for inhabitants of the city and adjacent region, mostly represent it. A part of population finds job opportunities in Košice. Nevertheless, the rate of unemployment as at 31 December 2000 is very high and in the district of Prešov reached 21.2 %, which is less than the rate of unemployment in the region of Prešov (22.1 %), but much more than the average rate of unemployment in the Slovak republic (17.9 %).
• In the financial area a relative strength of the city is a clearly defined concept in the key areas of local management. In the framework of the basic concept a clear philosophy in handling municipal property is also laid down, whereby eventual sale of property is a targeted process. The city has exactly defined managing structures, responsibilities of the different levels of management, as well as obligations of the municipality members. A supporting management tool consists partly of the urban information system, which allows the automation of different control mechanisms, e.g. through various defined access rights and authorizations for the access to the system. Another tool of management and its integral part - control is the well-developed system of internal regulations of the municipality.
• We highly appreciate the developed system of internal directives, Directives of the Mayor and other regulations governing the primary functions of the city and the utilization of its property, their availability to the public, which is an important step in building transparency in local management. It also creates conditions for the assurance of equal business conditions for all potential clients of the city.
• We positively evaluate total liquidity of the City of Prešov. The available volume of financial means (cash) as at 30 June 2001 represented SK 97.090 mil., by which liabilities of the city (short-term liabilities and debt service of the city) are covered to 67.88% and short-term liabilities are 5-times lower than the said volume of high liquidity assets.
• We positively perceive the success of the City of Prešov in the tender for cooperation with the US Agency for International Development (USAID) which implements the project "Slovakia Local Economic Development" in the Slovak Republic. In the framework of this project strategical plans of economic development should be worked out for four Slovak cities (Prešov, Humenné, Trnava and Šaľa). The project manager is the Czech/American company Berman Group established in the market of consultancy in economic development of cities as leader on the field of strategical planning and it will provide the affected cities with consulting support. The formulation of the strategical plan should support economic opportunities related to the growing market of mobile foreign investments directed to the Central and East European countries and the integration of the Slovak Republic to the Euro-Atlantic structures and connected with the preparations to the implementation of structural policy of the European Union in Slovakia. The completion of the project is expected in December 2002.
• The uncertainty of external environment is created by unapproved state budget of the Slovak Republic for the year 2002 because the amount and the way of redistribution of decentralization subsidies for cities and the amount of redistributed shared taxes for the year 2002 are not obvious. The City of Prešov will start the budget year 2002 with a provisional budget but it is assumed that at the time of its adoption the state budget for the year 2002 as one of basic prerequisites for quality planning of municipal budget for the following year will be approved as well.

Slovak Rating Agency
Bratislava, 12 December 2001