OREANDA-NEWS. On 05 June 2008 Credit-Rating, a nationally recognized credit rating agency in Ukraine announced that it assigned a long-term credit rating of uaBBB to the city of Chernivtsi (`city`). In the course of analysis Credit-Rating considered city`s key economic and financial indicators for 2003-2007 as well as other inside information furnished by the city council.

An obligor or a debt liability with uaBBB credit rating is characterized with the SUFFICIENT creditworthiness as compared to other Ukrainian obligors or debt liabilities. This level of creditworthiness is affected by adverse changes in commercial, financial and economic conditions.

Factors maintaining the credit rating

High growth rates of city budget`s general fund incomes exclusive of transfers in the past 3 years; specifically the amount of incomes was in excess of 26.8% in 2005, of 25.8% in 2006, and of 49% in 2007 as compared to the previous periods.

The city`s key figures has been stably growing in 2003-2007, in fact the retail goods turnover grew3.2x to UAH1.9bn, the fixed-capital investments increased 4.6x to UAH879.9m, the amount of foreign direct investments advanced 2.5x to USD33.2m.

City`s social development indicators have enhanced in 2003-2007: the number of employees added 7.9% to 74.7K, which is 30.3% of the city`s overall population, accompanied by plunged unemployment rate (0.5%), which is lower than that national of 2.4%.

The city does not have direct debt obligations as of Jan.1, 2008.

Factors constraining the credit rating

City`s dependency upon grants from the State budget, specifically upon leveling subsidies, which ratio to incomes of city budget`s general fund was 12.9% in 2007, with this figure anticipated to soar to 17.9% in 2008.

The average wage in January-December 2007 was 14.1% lower than the national median wage, accompanied by budget incomes` dependency upon gains from individuals tax, in fact the specific gravity of this source in incomes of the budget`s general fund, exclusive of transfers, accounted for a. 66.8%.

The per capita city`s performance indicators has been lower than the national figures in the past 5 years: in 2007 the industrial produce sales were 2.9x lower, the export goods turnover was 3.2x lower, the volume of foreign investments was 3.9x lower, and the fixed capital investments by 12.3%.

High deterioration of city`s fixed assets, including the housing sector, utilities and transport infrastructure which requires significant investments for their renovations.