I. STATEMENT ON RATING
Slovak rating agency confirms the following ratings for the City of Komárno:
| Long-term crown rating | BB+ (stable outlook)
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| Long-term FX rating | B+ (stable outlook)
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| Short-term rating | S3
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In the category of transactions in Slovak crowns the City of Komárno was assigned the long-term rating of BB+ (stable outlook). In the category of transactions in foreign currencies the City of Komárno was assigned the rating of B+ (stable outlook). The short-term rating of the City of Komárno is S3, which is the best possible short-term rating for entities with a long-term rating of BB+.
Justification:
- Slovak Rating Agency positively perceives the endeavour of the new city management to establish better quality relations within the City Hall, in communication with the new City Council and the effort to improve the management of public finances and the assets of the city. In the course of 2003 fairly radical organisational and personnel changes were undertaken at the City Hall, the objective of which was primarily to rationalise the operations of the office, the elimination of duplicity of activities, and improvement of communication between individual levels of management both vertically and horizontally.
- The city records a high level of receivables, which at the close of 2002 amounted to almost SKK 103 million, of which SKK 81 million comprised receivables with a risk of non-collection. The new management of the city has developed a new strategy regarding the administration and enforcement of receivables, which the agency deems as positive. Existing receivables of the city were mapped out and split into groups according to the level of enforceability. Slovak Rating Agency regards the existence of liabilities more than 60 days in arrears as of 30 June 2003 as negative, even though the share of these in actual current income in 2002 did not exceed 0.5%.
- In the upcoming period the city will carry out the modernisation project "Waste water management of the City of Komárno", which is to be financed from the ISPA fund. The share of city resources for the project will come from loan sources worth SKK 80 million. We recommend that the city halt any increase in borrowing, as the assumption of further loans without any real increase in revenues could mean increased pressure on liquidity in future.
- The agency rates as positive the increased level of professionalism, ability and expertise at various levels of management of the city, and despite the increasing level of indebtedness of the city we see no increased risk to the payment ability of the city. The agency recommends that it seek other non-returnable forms of financing for any other projects and investment objectives.
- The agency positively sees the fact that the city has a clear strategy established with regard to managing the interest shares of the city. The aim of the management is to gradually sell off all the stakes held by the city that are ineffective and which are not related to performance of the public functions of the city.
Please don't hesitate to address your questions to autner@slovakrating.sk, or call +421 2 5464 5151.
Slovak Rating Agency
Bratislava, 29 October 2003