Home Ratings and Research Currently valid ACRA Europe affirms unsolicited rating of BBB+ to DUNAJSKÁ STREDA, outlook Stable
ACRA Europe affirms unsolicited rating of BBB+ to DUNAJSKÁ STREDA, outlook Stable
Friday, 06 December 2019

The rating assigned to the city of Dunajská Streda remains unchanged and is mainly based on a positive assessment of high liquidity levels and operating balance surpluses. In the debt profile, the lower assessment is based on the results of the debt burden analysis, where ACRA Europe has lowered the scoring because of deterioration in the debt outlook indicators.

The last budget adjustment indicates that the city would increase the total amount of income by more than 12% compared to the planned values in the city budget, which was due to higher amount of shared tax and transfers from the state. The capital revenues and expenditures adjustment were significant, and the budget increased, as the city initially set the capital part of the budget very conservatively. In the expenditure part of the municipal budget, changes were implemented due to higher costs resulting from new legislative obligations for municipalities. Although the operational balance surplus has decreased, it will still cover the annual debt servicing of the city in full.

Rating components

Institutional Factors
Governance and Fiscal Flexibility Moderate
Budgetary and Management Performance High
Political Environment High
Transparency High
Final assessment  High
Financial Factors
Debt Profile Very high
Liquidity Profile Very high
Operating Balance High
Regional Economy High
Final assessment High
Extraordinary Support
Final assessment High
Overall score High
Final rating BBB+

Outlook: Stable

The outlook has been assigned based on the expectation of a high level of short-term liquidity, sustainable level of current balance surpluses, and the ability of the city to cover all debt service obligations despite increased indebtedness.

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 ACRA Europe‘s complementary assessments, an extraordinary support analysis with the rating of the 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 Dec 31, 2016 % Execution Dec 31, 2017 % Execution Dec 31, 2018 %
Current income total 17,505 102% 18,842 100% 21,146 102%
Tax income 10,089 103% 10,761 102% 11,973 104%
Non-tax income 1,999 104% 2,295 97% 2,933 98%
Grants and subsidies 5,417 100% 1,341 93% 6,240 100%
Current expenditure total 15,641 97% 16,642 99% 18,510 96%
Interest expenses 101 80% 86 99% 92 104%
Current account surplus/deficit 1,864 x 2,200 x 2,636 x
Capital income total 497 77% 178 18% 674 43%
Income of property sold 253 65% 178 101% 674 43%
Capital grants and subsidies 244 95% 0 0% 0 0%
Capital expenditure total 1,399 88% 1,316 28% 6,236 74%
Capital account surplus/deficit -902 x -1,138 x -5,562 x
Financial operations, income 623 100% 1,477 61% 5,888 100%
Loans from banks 0 100% 668 42% 2,532 100%
Financial operations, expenditures 666 100% 619 100% 558 100%
Principal payments 476 100% 419 100% 421 100%
Financial account surplus/deficit -43 x 858 x 5,330 x
TOTAL INCOME 18,625 101% 20,497 93% 27,708 98%
TOTAL EXPENDITURE 17,706 96% 18,577 84% 25,304 90%
TOTAL BUDGET SURPLUS/DEFICIT 919 x 1,920 x 2,404 x

Sources: 20162018 Budget execution reports for the city of Dunajská Streda, ACRA Europe’s calculations

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

Balance item Dec 31, 2016 Dec 31, 2017 Dec 31, 2018
Assets      
Fixed Assets: 65,487 65,293 68,486
Intangible assets 69 101 112
Tangible assets 45,733 44,193 47,238
Long-term financial assets 19,685 20,999 21,136
Short-term assets: 6,585 8,953 8,353
Stock 0 0 0
Settlements 2,201 3,340 3,937
Long-term receivables  0 0 0
Short-term receivables 2,065 1,813 1,685
Cash and equivalents 1,919 3,400 2,331
Repayable financial assistance 400 400 400
Accruals 274 232 193
TOTAL ASSETS 72,346 74,478 77,032
Liabilities      
Equity/Funds 60,064 60,767 61,920
Liabilities 7,708 9,042 9,836
Long-term liabilities 2,035 1,949 1,849
Short-term liabilities 1,120 2,241 969
Reserves 3 2 2
Bank loans and financial assistance 4,550 4,850 7,016
Settlements 0 0 0
Accruals 4,574 4,670 5,277
TOTAL LIABILITIES 72,346 74,478 77,032

Sources: 2016–2018 Financial statements for the city of Dunajská Streda, ACRA Europe'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 23,175 21,401 22,088
Tax income 12,910 12,394 13,081
Non-tax income 2,785 2,627 2,627
Grants and subsidies 7,480 6,380 6,380
Current expenditure total 21,447 19,823 20,384
Interest expenses 101 127 127
Current account surplus/deficit 1,728 1,578 1,704
Capital income total 1,906 85 85
Income of property sold 406 85 85
Capital grants and subsidies 1,500 0 0
Capital expenditure total 5,156 69 69
Capital account surplus/deficit -3,250 16 16
Financial operations, income 2,504 0 0
Loans from banks 0 0 0
Financial operations, expenditures 982 582 582
Principal payments 982 582 582
Financial account surplus/deficit 1,522 1,012 1,138
TOTAL INCOME 27,585 21,486 22,173
TOTAL EXPENDITURE 27,585 20,474 21,035
TOTAL BUDGET SURPLUS/DEFICIT 0 1,012 1,138

Sources: 2019–2021 Multiannual budget forecast for the city of Dunajská Streda, ACRA Europe'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 Dec 31, 2016, Dec 31, 2017, and Dec 31, 2018 Statistical Bureau of the Slovak Republic
Notes to financial statements for Dec 31, 2016, Dec 31, 2017, and Dec 31, 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 Dunajská Streda city web-page
City controller report on budget forecast for 2019 and Multiannual city budget for 2020–2021  
Investment Plan for 2019  
Semi-annual monitoring report of budget implementation in the City of Dunajská Streda  

Rating history

The rating was last released for distribution on June 7, 2019. The previous unsolicited rating assessment was released at BBB+, outlook Stable.

Regulatory disclosure

The unsolicited credit rating and outlook were issued in accordance with ACRA Europe methodology for sub-sovereign entities in the version from May 31, 2019 (available at https://acra-europe.com, 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 https://acra-europe.com (Regulatory Framework/Disclosure). The disclosure of the unsolicited rating and outlook was preceded by the approval of the Rating Committee. Since July 30, 2012, ACRA Europe 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 sub-sovereign ratings and their outlook are expected to be revised within 6 months following the publication date of this press release as per the Calendar of planned sub-sovereign rating revisions and publications.

This rating is issued as an unsolicited rating. The rated entity did not participate in the credit rating assignment. ACRA Europe did not have access to the rated entity’s internal documents or management. ACRA Europe, in the context of routine care, verified all sources entering the rating process and considers the scope and quality of the information entering the analytical process to be sufficient to assign a credit rating. The rated entity was notified on December 4, 2019, and after the notification there were no changes or amendments in the rating.

ACRA Europe provided no additional services to the City of Dunajská Streda. No conflicts of interest were discovered in the course of the sovereign credit rating assignment.

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