Fitch assigns TransContainer's 5 bln rubles in bonds 'BB+' rating
MOSCOW/LONDON. Feb 22 (Interfax) - International ratings agency Fitch Ratings has assigned OJSC TransContainer's ('BB+'/Negative) bond series 04 issue, a five-year RUB5bn 8.35% bond (the bond) due January 26, 2018, senior unsecured rating of 'BB+', the agency said in a press release.
The bond is unsecured and ranks pari passu with all existing unsecured debt, including the outstanding bond series 02 issue of RUB3bn, which matures in June 2015. There are no financial ratio covenants or change of control clauses and the mandatory prepayment terms do not relate to all of the company's debt. The bond issuance proceeds are to be used for general corporate purposes as well as the refinancing of debt, comprising the RUB3bn bond issue series 01, which matures on 26 February 2013, Fitch reported.
Similar to the bond series 02 issue, the RUB5bn bond has ten coupon periods, each subject to equal interest rate payments. It has an amortizing repayment structure, and will be repaid in four equal installments on the seventh, eighth, ninth and tenth coupon payment dates, the press release said.
There is no explicit cross-default with all unsecured debt issued by the company, but mandatory prepayment terms refer to bonds issued by the company, if in default or in mandatory prepayment. Whilst we view this clause as weak, the company's relatively low leverage acts as a mitigant, it said.
TransContainer's Long-Term Issuer Default Rating (IDR) of 'BB+' currently includes a one-notch uplift for parental support from OJSC Russian Railways (RZD) ('BBB'/Stable), its present majority shareholder. The Negative Outlook reflects RZD's earlier decision to further reduce its stake in TransContainer to below 50%, and the remaining uncertainty about the timing of the disposal and the percentage of shares to be disposed of, Fitch said.
Fitch will no longer incorporate RZD's parental support into TransContainer's ratings, in accordance with Fitch's parent and subsidiary rating methodology, once RZD's stake drops below 50%. RZD's plans to maintain a 25%+1 share stake in TransContainer and a recent agreement to pay EUR800m for a 75% stake in France's Gefco, a logistics company, implies RZD's ongoing interest in the segment and the company, which will remain important to RZD in terms of strategy and operations, the press release said.
Fitch views TransContainer's standalone profile as being commensurate with a weak 'BB' rating. It is supported by the company's leading position in Russia in terms of flat-car and container fleet, its strong presence in key locations in Russia and central Asia after the acquisition of Kedentransservice in Kazakhstan in 2011, a well-diversified customer base and moderate leverage, the press release said.
In 2011 TransContainer reported funds from operations (FFO) adjusted leverage of 1.5x, down from 2.2x in 2010. Fitch considers further deleveraging unlikely in view of the company's 2012-2013 capex forecast, and the RUB1.2bn dividend paid in 2012. The agency expects FFO adjusted leverage to remain under 1.6x in the medium term.
According to Fitch, TransContainer's 9M12 consolidated revenues under IFRS reached RUB27.4bn, up 24.5% yoy on the back of strong pricing and shipment volumes. EBITDA margins also continued to be strong at around 29.2% driven by continued operating efficiencies and cost-savings.
Fitch's outlook for rail transportation in Russia is stable, based on the agency's Russian GDP growth forecast of 3.8% on average for 2013-2014. Fitch conservatively estimates that Russia's container transportation volumes will increase by mid- to high single digits in 2013-2014, fuelled by the expected moderate GDP growth and the high potential for further cargo containerization in Russia.
However, growth is not expected to be as strong as it has been over the recent past. Despite continued growth, Q412 operating results signaled some signs of a slowdown in the Russian container transportation market relating to the weakening economic environment, the press release said.
The current Rating Outlook is Negative. As a result, Fitch's sensitivities do not currently anticipate developments with a material likelihood, individually or collectively, of leading to a rating upgrade. Future developments that may nonetheless potentially lead to a stabilization of the Outlook include: a delay in the disposal by RZD of TransContainer's shares in the coming months as long as TransContainer's performance remains in line with expectations for the current standalone rating level, the press release said.
Future developments that could lead to negative rating action include: funds from
operations (FFO) adjusted leverage consistently above 2.0x and FFO interest coverage consistently below 8x, perhaps as a result of a prolonged step-up in capex, could result in a negative rating action, Fitch said.
Once privatized, TransContainer's ratings may be affected by the relative credit strength of a new majority shareholder and the parent-subsidiary arrangements put in place. Sizeable acquisition funding raised at the TransContainer level may put pressure on the ratings, the press release said.
At end-Q312 TransContainer had RUB3.8bn in cash and short-term deposits. This was sufficient to cover RUB3.4bn in short-term maturities, including the RUB3bn bond issue series 01 maturing in February, which will be refinanced by the recently issued RUB5bn bond. Its sources of liquidity are cash flows from operations, which Fitch forecasts will continue to be healthy, and credit facilities, albeit uncommitted with key Russian banks for RUB8bn. These are deemed sufficient to cover its remaining obligations in 2012-2015, Fitch reported.
