Fitch Maintains Russia's Freight One on Rating Watch Negative
LONDON. Aug 2 (Interfax) - International Ratings Agency Fitch is holding onto its long- ratings on Rating Watch Negative (RWN) for OJSC Freight One ("BBB-"), the agency said in a press release.
The press release said; "Freight One's Long-term foreign and local currency Issuer Default Ratings (IDR) of 'BBB-' currently include a one-notch uplift for parental support from JSC Russian Railways (RZD, 'BBB'/Stable/'F3'), its sole shareholder. The maintained RWN follows an announcement by RZD that on 28 July 2011 the Government of the Russian Federation, its sole shareholder, approved a sale of 75% less two shares in Freight One by the end of 2011.
"Fitch views the existing standalone business and financial profile of Freight One as commensurate with a Long-term IDR of 'BB+'. Consequently, following the disposal by RZD, Fitch will no longer incorporate RZD's parental support into Freight One's ratings under Fitch's Parent-Subsidiary Rating Linkage methodology. The agency emphasises that Freight One's ratings may be impacted by the relative credit strength of a new majority shareholder and the parent-subsidiary arrangements put in place (including the effect of possible acquisition funding). To resolve the RWN, Fitch will therefore seek clarification about the new ownership structure and the purchase financing following the disposal.
"Freight One represents over 10% of RZD's consolidated revenues and is therefore a principal subsidiary (as defined in RZD's loan participation notes). Freight One's default (among other events) could be an event of default for RZD. Fitch understands that Freight One's loans do not include change of control provisions.
"Freight One is a leading rolling stock operator in Russia and the CIS by fleet size and transportation volumes, with a strong ability to execute customer demand, and has a diversified fleet and customer base. In H111, Freight One transported over 148 million tones of cargo, a 12% increase on H110, which accounted for about 22% of all cargo shipped by rail in Russia over that time."