Fitch Affirms Raspadskaya at 'B+'; Stable Outlook
MOSCOW. Nov 3 (Interfax) - Fitch Ratings has affirmed Russia-based coal producer OAO Raspadskaya's (Raspadskaya) Long-term foreign currency Issuer Default Rating (IDR) and senior unsecured rating at 'B+', and its National Long-term rating at 'A(rus)'.
The ratings agency said in a statement: "The Long-term IDR and National Long-term rating have Stable Outlooks. The Short-term IDR has been affirmed at 'B'. The Recovery Rating on the senior unsecured notes is 'RR4'. Fitch has also assigned Raspadskaya a Long-term local currency IDR of 'B+', with a Stable Outlook.
"The ratings are supported by Fitch's expectations that the company's Raspadskaya mine, which was shut down as a result of an explosion on 9 May 2010, will be fully operational during 2012 and that average coking coal concentrate prices during 2011 and early 2012 will remain at historically favorable levels. In its forecasts, Fitch has assumed that the company's other mines will also continue to ramp up over the next quarter, with total output increasing 20%-25% by 2013 compared with 2009 levels.
"Fitch considers Raspadskaya's financial position and liquidity as strong, supported by cash and cash equivalents of USD415m at 1H11. Fitch estimates Raspadskaya's 2011 revenue at between 5% and 10% higher than the 2010 figure, with an EBITDA margin of between 45% and 50%, boosting cash generated from operations. According to the agency's estimates, Raspadskaya should be able to fund reconstruction activities at its Raspadskaya mine (estimated at a total cost of USD280m) from internally generated cash flows and be in a strong position to either refinance or repay the USD300m Eurobond due on May 22, 2012.
"Despite higher cash costs per tonne at 1H11, Raspadskaya's ratings continue to reflect its competitive through the cycle cost position, its robust average mine lives of over 70 years at existing operations, and its conservative financial policy. Fitch views favorably the company's efforts to reduce its high dependency on the key Raspadskaya mine, with its share in total output gradually declining to approximately 45% by 2013 from 65% in 2009.
"However, Raspadskaya's ratings remain constrained by its smaller scale relative to global peers, lack of commodity diversification, the execution risks inherent in the mine's reconstruction and expansion plans, and its large Russian operational base, which exposes it to higher than average political, business and regulatory risks, making a positive rating action unlikely over the medium term.
"Negative rating pressure could arise from a slower than expected ramp-up of production at the Raspadskaya, Razrez Raspadsky and Raspadskaya-Koksovaya mines, as well as a significant drop in 2012 sales prices, leading to a significant and sustained deterioration in the company's financial position. A key driver for such an action would be the development of total cash costs over the next 18 to 24 months and whether costs will moderate in line with the agency's expectations as output recovers following the mine reconstruction."