Statement on rating

The Slovak Rating Agency grants following ratings to City Levice:

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 two degrees below the rating of the Slovak Republic (A - stable outlook). In the category of foreign currencies rating BB (stable outlook) has been granted to City Levice, which is two degrees below the risk level of the Slovak Republic (BBB- stable outlook). Short-term rating of City Levice is S2, which is the best possible short-term rating for the entities attaining long-term rating BBB.

Rationale

• From the political and administrative point of view, City Levice is the seat of the district Levice associating 88 municipalities that ranks the district among the greater districts within the Slovak republic. With the area of 61 km2 and the population of 36 538 inhabitants as of May 26, 2001 Levice is one of the smaller cities in Slovakia. The sector structure within the industry of Levice is not diversified markedly. The industry in the city is focussed on textile, chemical and building industries, which are represented by industrial enterprises with Slovak as well as foreign capital. Nevertheless, the unemployment rate of Levice is very high with 25 %, which is more than the unemployment rate in the region of Nitra (21,45 % as of May 30, 2002) and more than the national unemployment rate (17,67 % as of May 30, 2002). The unemployment rate in the district of Levice reached the value of 26,17 % as of May 30, 2002. High unemployment rate in the city has negative impact on payment procedure of the entities in the city and natural persons, which is shown by arrears of real estate taxes and further charges.
• In the financial area, the strength of the city is a clearly defined concept in the financial local management and in the area of disposal with its property. In terms of the concept of disposal with the property, the city has clearly defined proprietary assets and property assigned to sale. Analysis developed by relevant divisions with regard to its further use and the offered purchase price is subject to the sale of the real property of the city. For the purpose of strategic management in fulfilment of financial and economic tasks, the city created the financial analyst function, which will fully monitor the activities of various divisions at the Mayor office and will consolidate their deliverables.
• The volume of real incomes of the city shows ascending development trend. The structure of budgeted revenues started to be diversified in 2001 as a result of accepted grants as favourable source of financing and credits. We evaluate positively the total liquidity of Levice. The volume of available funds of the city reached the amount of SKK 63 084 thousand as of ultimo of 2001, which means the short-term liabilities and the debt service of the city has been covered nearly six times. We appreciate positively the development of the debt-service-to-revenues indicator showing descending development trend and ration has reached the value of 3,79 % as of ultimo of 2001. According to new budget regulations, the debt-service-to-current-revenues ratio should represent 12,8 % in 2002, which means that the city will keep the principle of covering of current expenditures by current revenues.
• As of ultimo of 2001, the city recorded bank credits and loans in the volume of SKK 80 million. In this year, the city is seeking for acquiring funds from ISPA fund for increase of performance parameters of the existing ČOV. Due to only 50 % financing of the project, the city will have to cover the remaining investment costs by credit resources, which, according to the municipality authorities, are planned in the volume of ca SKK 90 million. In our opinion, accepting such credit with unchanged volume of real income may significantly affect the city indebtedness, which could cause increase of pressure on city liquidity. Due to increasing volume of credits, it has to be mentioned that the volume of accepted credits has to be considered not only in association with the city indebtedness and ability to pay the accepted credits, but also from the perspective of new budget regulations.
• In order to decrease the unemployment within the city and surroundings, the city pursues activities associated with establishment of industrial zone Géňa and creates conditions for the accession of foreign and domestic investors. If entrenched, new employment opportunities could be created, which could affect positively the development of the living standards within the city.
• Within the scope of public administration reform, the city is prepared to assume the delegated competences. As for the education competences, the city organises meetings with relevant schools in the city in order to get information concerning the delimitated assets. In connection with the transition of competences, the city adjusted its organisational structure expecting new employment opportunities. The city has financial reserves for covering the potential hidden debt within delimitated assets.
• In the area of environment, the city aims to create the best possible conditions for a healthy living of its inhabitants. The city is spending considerable funds for that purpose. Establishment of large area part in the city can be mentioned as the example, as well as reconstruction of free capacities for using them as recreation facilities and building and reconstruction of large sports area (ice-ring, indoor sports stadium, indoor swimming pool).
• City is seeking for acquiring various domestic as well as foreign grants and so getting sing funds for financing of its investment activities. For this purpose the project manager function has been created, which assures the processing of complex documents required for applying for drawing the grants and withal he represents the city at various conferences, presentations and other marketing events, e.g. Levice was among the first one hundred top projects of all 544 international worldwide projects at the international competition Dubai Prize hold in 2001. All documents are prepared by the city itself in foreign-language versions as well.

Please don't hesitate to address your questions to autner@slovakrating.sk, or call +421 2 5464 5151.

Slovak Rating Agency
Bratislava, 9 July 2002