S&P: Samara Oblast bonds BB+

Standard & Poor's said that it revised the outlook on Samara Oblast to stable from negative and affirmed the BB+ long-term issuer credit and ruAA+ Russia national-scale ratings.

S&P assigned a recovery rating of 3 to the oblast's planned five-and-one-half-year amortizing RUB 12.2 billion bond, which the oblast intends to place on June 8. The recovery rating indicates the expectation of meaningful (50%-70%) recovery in the event of a payment default. S&P assigned BB+ and ruAA+ senior unsecured debt ratings to the proposed bond.

The outlook revision reflects the view that Samara Oblast will maintain its sound liquidity position and that its debt repayment schedule will become relatively smooth after bulk repayments in 2012, the agency said.

The ratings on the oblast reflect its limited revenue flexibility and predictability due to dependence on federal transfers and taxes, exacerbated by economic concentration, and rising operating and capital spending pressure, the agency added. The ratings are supported by modest debt levels and moderate, albeit weakening, budgetary performance.

The stable outlook reflects the view that in 2011-2013 additional revenues and already secured refinancing will allow Samara Oblast to absorb rising expenditure pressure without affecting its sound liquidity position, S&P said.

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