I. STATEMENT ON RATING
The Slovak Rating Agency hereby assigns the City of Prešov the following credit rating:
| Long-term koruna rating | BBB+ (negative outlook)
|
| Long-term foreign currency rating | BB+ (negative outlook)
|
| Short-term rating | S2
|
The assigned long-term rating in the category of transactions in Slovak crowns of BBB+ (negative outlook) is 1 point lower than the rating of the State (A- stable outlook). In the category of transactions in foreign currencies the City of Prešov was assigned the credit rating of BB+ (negative outlook). The short-term rating of the City of Prešov is S2, which is the best possible short-term rating for an entity with a long-term rating of BBB+.
Justification:
- Just as in the previous period, the strength of the City in this period continues to be its strategic planning. The City elaborated a project objective that defines the investment priorities for the period 2004 - 2006. The City plans investments of SKK 78.8 million in 2004, of which the volume of investments still being prepared represents SKK 65.4 million. The Slovak Rating Agency does however perceive negative the fact that the investments are financed almost completely by borrowing.
- The possibilities of the City of Prešov to finance its own requirements from the pre-accession and post-accession funds of the EU are limited as in order to draw them it is necessary for the City to participate partially also with its own resources. The agency therefore recommends that the City of Prešov reassesses its planned investments, and to implement these in stages, which would then boost possibilities of the City to draw on EU funds.
- The agency positively evaluates the effort of the City to diversify its portfolio of bank creditors. All credit relations were taken on with the aim of financing investment objectives of the City and the repayment of the current volume of drawn loans is not regarded as risky. The municipal budget for 2004 is strained however, and sufficient space has not been created for the formation of reserves for unforeseeable situations, thereby increasing also the risk for creditors should the City increase the level of indebtedness. In the opinion of the agency, it is necessary to reassess the timetable for carrying out investments and the manner of their financing.
- The City has reserves in terms of increasing the revenues of the City. The agency therefore recommends reassessing the economic suitability of concluded contractual relations and to re-evaluate other alternative ways of boosting the resources of the City also in the area of taxation.
Please don't hesitate to address your questions to autner@slovakrating.sk, or call +421 2 5464 5151.
Slovak Rating Agency
Bratislava, 16 December 2003