Home Ratings and Research Currently valid ERA affirms unsolicited rating A- to TRNAVA, outlook Stable
ERA affirms unsolicited rating A- to TRNAVA, outlook Stable
Friday, 31 May 2019

The affirmation of the unsolicited credit rating of Trnava stems from changes in the evaluation of key assessment indicators according to ERA's new Methodology, where greater importance is placed on debt, liquidity profile, and operating balance indicators. With floating weights, higher weight is assigned to debt and liquidity indicators when exceeding the deterioration limit values.

The rating assigned to the city of Trnava remains unchanged and is mainly based on a positive assessment of the current and projected debt levels, high liquidity levels, and operating balance surpluses.

Rating components

Institutional Factors

Governance and Fiscal Flexibility

Moderate

Budgetary and Management Performance

Very high

Political Environment

High

Transparency

Very high

Final assessment

 High

Financial Factors

Debt Profile

Very high

Liquidity Profile

Very high

Operating Balance

Very high

Regional Economy

Moderate

Final assessment

Very high

Extraordinary Support

Final assessment

High

Overall score

Very high

Final rating

A-

Outlook: Stable

The outlook has been assigned based on the expectation of low risk after increased debt, a high level of liquidity, and high levels of operating balance surpluses.

The stable outlook assumes that the rating will most likely stay unchanged within the 12-month horizon.

Key assumptions

  • Indebtedness will not increase significantly compared to 2019;
  • The short-term liquidity ratio will not reach lower levels than forecasted for 2019;
  • The operating balance will reach a higher surplus than projected for 2019.

Potential outlook and/or rating change factors

A positive rating action may be prompted by:

  • Significantly lower debt levels than forecasted for 2019;
  • Significantly higher operating balance surplus compared to 2018;
  • Significantly higher use of capital grants than projected for 2019;
  • Significant improvement in macroeconomic development in the Slovak Republic.

The likelihood that the positive rating action factors will be fulfilled during the rating period is considered to be low.


A negative rating action may be prompted by:

• Significantly higher debt levels than projected for 2019;

• Significant deterioration of liquidity indicators compared to 2018;

• Significantly lower level of operating balance surplus than projected for 2019.

The likelihood that the negative rating action factors will be fulfilled during the rating period is considered to be low.


In ERA's complementary assessments, an extraordinary support analysis with the rating of sovereign entity are also taken into consideration. The full rating report in Slovak is available here.

Appendix 1. Budget Execution Reports for 2016 – 2018 in thous. EUR

Budget item

Execution 31/12/2016

in %

Execution 31/12/2017

in %

Execution 31/12/2018

in %

Current income total

49,196

107 %

52,194

106 %

55,464

104 %

  Tax income

34,977

108 %

36,836

106 %

39,729

105 %

  Non-tax income

5,377

113 %

5,781

117 %

5,709

114 %

  Grants and subsidies

8,842

98 %

9,577

100 %

10,026

97 %

Current expenditure total

42,744

97 %

44,555

97 %

47,252

85 %

  Interest expenses

299

91 %

268

97 %

229

90 %

Current account surplus/deficit

6,452

x

7,639

x

8,212

x

Capital income total

1,719

87 %

334

16 %

973

24 %

  Income of property sold

1,454

108 %

267

18 %

833

114 %

  Capital grants and subsidies

265

42 %

67

12 %

140

4 %

Capital expenditure total

3,460

41 %

9,064

47 %

7,508

38 %

Capital account surplus/deficit

- 1,741

x

- 8,730

x

- 6,535

x

Financial operations, income

3,440

53 %

8,799

54 %

6,369

43 %

  Loans from banks

0

100 %

1,450

27 %

1,289

33 %

Financial operations, expenditures

1,839

100 %

2,092

105 %

2,206

100 %

  Principal payments

1,839

100 %

1,856

93 %

2,076

94 %

Financial account surplus/deficit

1,601

x

6,707

x

4,163

x

TOTAL  INCOME

54,355

100 %

61,327

91 %

62,806

87 %

TOTAL  EXPENDITURE

48,043

88 %

55,711

83 %

56,966

79 %

TOTAL BUDGET SURPLUS/DEFICIT 

6,312

x

5,616

x

5,840

x

Sources: 2016-2018 Budget execution reports for the city of Trnava, ERA's calculations

Appendix 2. Balance Sheet for 2016 – 2018 in thous. EUR

Balance item

31/12/2016

31/12/2017

31/12/2018

Assets

Fixed Assets:

166,114

168,561

166,331

  Intangible assets

10

6

6

  Tangible assets

146,201

148,652

146,422

  Long-term financial assets

19,903

19,903

19,903

Short-term assets:

51,939

50,695

54,969

  Stock

100

63

66

  Settlements

32,907

33,491

36,157

  Long-term receivables 

723

626

451

  Short-term receivables

3,174

2,650

3,163

  Cash and equivalents

15,035

13,865

15,132

  Repayable financial assistance

0

0

0

Accruals

190

240

336

TOTAL ASSETS

218,243

219,496

221,636

Liabilities

 

 

 

Equity/Funds

170,258

174,599

177,652

Liabilities

19,618

19,936

21,347

  Long-term liabilities

4,909

4,687

4,890

  Short-term liabilities

3,364

3,874

4,069

  Reserves

2,534

2,584

4,292

  Bank loans and financial assistance

8,747

8,581

8,050

  Settlements

64

210

46

Accruals

28,367

24,961

22,638

TOTAL LIABILITIES

218,243

219,496

221,636

Sources: 2016-2018 Financial statements for the city of Trnava, ERA's calculations

Appendix 3. Multiannual City Budget for 2019 – 2021 in thous. EUR

Budget item

Budget for 2019

(after changes)

Budget for 2020

Budget for 2021

Current income total

55,022

53,522

53,904

  Tax income

38,682

38,497

39,007

  Non-tax income

5,005

5,084

5,084

  Grants and subsidies

11,335

9,941

9,813

Current expenditure total

52,878

49,830

49,565

  Interest expenses

270

270

270

Current account surplus/deficit

2,144

3,692

4,339

Capital income total

4,661

666

474

  Income of property sold

1,700

100

100

  Capital grants and subsidies

2,961

555

374

Capital expenditure total

15,218

1,811

2,596

Capital account surplus/deficit

- 10,557

- 1,145

- 2,122

Financial operations, income

10,877

0

0

  Loans from banks

5,145

0

0

Financial operations, expenditures

2,464

2,547

2,217

  Principal payments

2,464

2,547

2,217

Financial account surplus/deficit

8,413

- 2,547

- 2,217

TOTAL  INCOME

70,560

54,188

54,378

TOTAL  EXPENDITURE

70,560

54,188

54,378

TOTAL BUDGET SURPLUS/DEFICIT 

0

0

0

Sources: 2019-2021 Multiannual budget forecats for the city of Trnava , ERA's calculations

Appendix 4. List of Material Data Sources

Internal data sources

External data sources

Budget execution reports for 2016, 2017, and 2018

Ministry of Finance of the Slovak Republic

Balance sheet for 31/12/2016, 31/12/2017, and 31/12/2018

Statistical Bureau of the Slovak Republic

Notes to financial statements for 31/12/2016, 31/12/2017, and 31/12/2018

Eurostat

Budget forecast for 2019 and Multiannual city budget for 2020-2021

World Bank

Budget amendments in 2019

National Bank of Slovakia

2018 City controller report on control results

Trnava city web-page

City controller report on budget forecast for 2019 and Multiannual city budget for 2020-2021

Regulatory disclosure

The unsolicited credit rating and outlook were issued in accordance with ERA methodology for sovereign entities in the version from May 31, 2019 (available at www.euroratings.co.uk, section Methodology). In the same section is a rating scale including an explanation of the importance of each rating category and a default definition. Information on the rate of historical failure is available at www.cerep.esma.europa.eu, and the explanatory statement of the meaning of those default rates is available at www.euroratings.co.uk (Regulatory Framework/Disclosure). This rating is issued as an unsolicited rating, i.e. was not initiated by the rated entity or a related third party. The rated entity did not participate in the rating process and the information and documentation for its development was obtained from publicly available sources in accordance with ERA methodology. ERA did not have access to the rated entity's internal documents. ERA, in the context of routine care, verified all sources entering the rating process. ERA considers the scope and quality of the information entering the analytical process to be sufficient to assign a credit rating. The disclosure of the unsolicited rating and outlook was preceded by the approval of the Rating Committee. No actual or potential conflicts of interest have arisen. Since July 30, 2012, ERA has been a registered credit rating agency according to Regulation (EC) No 1060/2009 of the European Parliament and of the Council of September 16, 2009, on credit rating agencies. The previous rating assessment was released on June 29, 2018. The rated entity was notified about affirmation of credit rating assessment and outlook on May 29, 2019 and after the notification there were no changes or amendments in the rating. The previous unsolicited credit rating was released at A-, outlook Stable.

Download pdf:

Rating_Report_Sub-Sovereign_TRNAVA_EN.pdf


Approved by the Rating Committee:

Zuzana Hrebičková, Acting

Head of credit rating analysts

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