14 Oct 2009 15:51

S&P rates proposed Evraz bonds B+

MOSCOW. Oct 14 (Interfax) - Standard & Poor's Ratings Services has assigned its 'B+' local currency, senior unsecured debt rating to a proposed Russian ruble (RUR) 20 billion (approximately $700 million) domestic bond to be issued by LLC Sibmetinvest, a subsidiary of Russia-based steel producer Evraz Group S.A. (B+/Watch Neg/--), which guarantees the bond, the agency said in a press release.

At the same time, the debt rating was placed on CreditWatch with negative implications. The recovery rating on this issue is '4', indicating our expectation of average (30%-50%) recovery for bondholders in the event of a payment default.

The purpose of the issuance is to provide additional liquidity to support refinancing by Evraz. Sibmetinvest is an unrated wholly owned subsidiary of Evraz and is a Russian-incorporated finance holding company, with no operating activities of its own. Bondholders will be reliant on the guarantor to service and repay the debt.

In S&P's view, bondholders will be in a structurally weaker position relative to debt issued by Evraz group operating subsidiaries and by the parent company. Nevertheless, S&P rates the bond at the same level as the corporate credit rating on Evraz and have assigned the same debt and recovery ratings as those on other rated debt within the group. In a default scenario, S&P believes the bond would rank pari passu with other unsecured and unsubordinated obligations of the guarantor, on the basis that the guarantee is effective.

The bond will have a tenor of 10 years, with a put option after five years. The coupon payable will depend on market conditions at the time of issuance. There are no financial covenants.