Fitch downgrades Freight One to 'BB+'
MOSCOW. Jan 23 (Interfax) - International rating agency Fitch Ratings has downgraded OJSC Russian Railways (RZD) subsidiary OJSC Freight One's long-term foreign and local currency issuer default ratings to 'BB+' from 'BBB-', Fitch said in a press release.
Fitch also moved the company's short-term foreign and local currency issuer default ratings to 'B' from 'F3' and its national long-term rating to 'AA(rus)' from 'AA+(rus)'. The long term ratings are still on Rating Watch Negative, Fitch said.
"The downgrade follows the sale of a 75% stake (minus two shares) in Freight One by Russian Railways (RZD; 'BBB'/Stable/'F3') to Nezavisimaya Transportnaya Kompaniya LLC (Independent Transport Company; NTK) for 125.5 billion rubles. The share transfer occurred on 23 December 2011 following a tender held on 28 October 2011. The current ratings reflect Freight One's stand alone credit profile without any parental support or constraint," Fitch said.
"The Rating Watch Negative indicates that Freight One's ratings may be impacted by the relative credit strength of the new majority shareholder and the parent-subsidiary arrangements put in place, including the effect of possible acquisition funding (such as the reported 75 billion-ruble loan that NTK raised from Sberbank of Russia ('BBB'/Stable/'F3') and VTB Capital, a member of Russia's JSC Bank VTB ('BBB'/Stable/'F3')).
"To resolve the Rating Watch Negative, Fitch will therefore seek clarification about the new ownership structure, NTK's credit profile and the acquisition financing determining Freight One's links with the new controlling parent, as well as any revisions in Freight One's management, strategy and funding policy determining its stand alone credit profile.
"Fitch expects to conclude its review after the general shareholders meeting called for 10 February 2012. The agency anticipates that the continued presence of RZD as a shareholder (with 25% plus one share) in Freight One could support a degree of independence in terms of its credit profile that may lead to a ratings affirmation.
"Liquidity is adequate and is supported by 10.5 billion rubles of cash and 7 billion rubles of unused committed credit lines (maturing in 2012) compared to around 2.2 billion rubles of debt and finance leases due in 2012. Fitch views Freight One's capex as flexible and part of it is finance-leased and therefore does not affect the company's core liquidity," Fitch said.