Statement on rating

Slovenská ratingová agentúra (the Slovak Rating Agency) has assigned the following rating to the City of Trnava:

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

The assigned rating in the category of transactions in Slovak korunas, BBB+, stable outlook, corresponds with the country rating level of BBB+, positive outlook. In the category of foreign currency transactions the City of Trnava also received BB+ rating, stable outlook on the risk level of the Slovak Republic: BB+, positive outlook. Short-term rating for the City of Trnava is S2+, which is the best possible short-term rating for entities achieving long-term rating of BBB+.

Rationale

• The seat of region, the City of Trnava is located only 45 km from the Capital of the Slovak Republic, Bratislava. As for its size, Trnava is the seventh largest municipality in Slovakia with a population of almost 70 000. Vicinity of the international airport in Bratislava, highway route West-East and a busy railway proves the advantageous geographical location of the city, which the relatively strong representation of industrial companies in Trnava region profit from. Unemployment in the region is deeply under the national average.
• In the financial area the strength of Trnava is a clearly defined concept in all key areas. Relatively high level of financial management brings high stability into the development of financial indicators. Municipality has been reporting stable budget surpluses at the end of current year. Clear philosophy in handling municipal property, transparent concept for the development of the city and detailed planning of cash flow represent a guarantee of a systemic planning of budgets respecting the possibilities of the municipality. In financing area the principle that is honored is coverage of current expenditures by current revenues. Despite the increasing volume of tax receivables, we can state a good stability in raising out-of-budget financing resources, as well as risk diversification in raising funds and we view positively also activities of the municipality in the field of participation in grant and promotion programs (both domestic and foreign).
• In the ratio of own resources and external resources the city of Trnava achieves only 2.93 % of indebtedness. Significant part of assets is formed by tangible assets. Overall liquidity of the municipality of Trnava is assessed as positive. Available volume of funds increased by accounts receivable within the due date represents a volume of SK 79.81 mil., which covers all liabilities of the municipality up to 81.78 % and short-term liabilities are 6 times lower than the above-stated volume of high liquidity assets. The volume of debt service due in 2001 is covered by the volume of high liquidity assets more than twice. There is only a low probability that the municipality would have problems in paying its liabilities.
• We also state a very good preparedness of the municipality for assuming competencies and responsibilities resulting from the public administration reform. However, we feel a high sensitivity of the issue of perceiving own resources of municipalities, when shared taxes are not part of the own resources category and therefore access to commercial loans may become more difficult for the municipalities - from the view of lenders the relative indebtedness of municipalities will increase. On the other hand, according to the amendments under preparation it should not be possible to impose execution on these funds.
• The above-stated factors, together with a clear concept of financial management and relatively low sensitivity to political cycles, rank the City of Trnava among the least risky municipalities in Slovakia.

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

Slovak Rating Agency
Bratislava, 18 July 2001