Fitch lowers Russian Helicopters rating to "BB", outlook stable
MOSCOW. April 25 (Interfax) - Fitch Ratings has lowered its national and foreign-currency long-term issuer default ratings assigned to OJSC Russian Helicopters to "BB" from "BB+", outlook stable, the agency said in a press release.
"Fitch Ratings has downgraded Russian Helicopters JSC's (RH) local and foreign currency long-term issuer default ratings (IDR) to 'BB' from 'BB+' and long-term national rating to 'AA-(rus)' from 'AA(rus). The short-term IDR and the short-term national rating have been affirmed at 'B' and F1+(rus). The outlooks on the long-term IDR and the long-term national rating are stable," Fitch said.
"In line with Fitch's parent-subsidiary linkage methodology, the ratings incorporate a one-notch uplift for support for the company from the ultimate parent, the Russian Federation ('BBB'/stable).
"The downgrade of the long-term IDR reflects Fitch's view that, contrary to our prior expectations, the company failed to reduce leverage below the downgrade guideline of 3.5x at end-2012. Furthermore, Fitch believes the company's leverage is unlikely to improve materially in the short term and is no longer consistent with the expectations of a 'BB' standalone rating for this sector," the agency said.
"In 2012, the group's revenue and funds from operations (FFO) results were broadly within expectations. However, the company experienced a significant working capital outflow of 22.7 billion rubles, primarily as a result of delayed payments relating to several large export projects. Consequently, the group incurred a significant negative free cash flow (FCF) and had to increase debt levels in order to finance its investment needs and operations. This increased adjusted gross leverage to 3.9x, above our publicly stated 3.5x downgrade guideline.
"Fitch's new forecasts, performed on the basis of our assumptions concerning the company's likely profitability, investment needs, as well as the sector trends and dynamics, point to a capital structure in the short term that is unlikely to exhibit significant de-leveraging. This is primarily as a result of our expectation of consistently weak FCF generation. Fitch believes that the receipt of the delayed working capital payments in 2013 mentioned above are unlikely to be sufficient to offset the company's other investment needs. Consequently, we believe the company is unlikely to generate adequate FCF in the short term in order to return debt and leverage to previous levels and our prior expectations.
"The stable outlook is based on the assumption that neither the financial profile of the group, nor the support it receives from the Russian state, will materially change in the medium term," Fitch said.