Moody’s takes rating actions on Russian sub-sovereigns

Moody's Investors Service said it downgraded the cities of Moscow and St. Petersburg to Baa2 from Baa1, SUE Vodokanal and OOO Vodokanal Finance to Baa3 from Baa2 and OJSC Western High-Speed Diameter to Ba1 from Baa3. The outlook for these issuers remains negative.

Concurrently, Moody's changed the outlook of 12 Russian regional and local governments to negative from stable: the Republic of Bashkortostan, Republic of Tatarstan, Autonomous-Okrug of Khanty-Mansiysk, Samara Oblast, Chuvashia Republic, Krasnoyarsk krai, Komi Republic, Oblast of Omsk, Oblast of Nizhniy Novgorod, City of Krasnodar, City of Omsk and City of Volgograd.

The agency said the downgrades of Moscow and St. Petersburg reflect their strong institutional links with the federal government and lack of special status, which prevents them from being rated above the sovereign.

The downgrades of Vodokanal and Western High-Speed Diameter reflect their status as government-related issuers that are fully owned by the St. Petersburg government, Moody’s said.

The change in outlook for Bashkortostan, Tatarstan and Khanty-Mansiysk reflect their exposure to rising systemic pressures, the agency said.

Moody’s said the changed outlook for the remaining nine regional and local governments takes into account the inherent weaknesses in their performances, which undermine their ability to resist a possible deterioration in the macroeconomic environment.

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