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06 May 2008
Moody's assigns B1 rating to ChTPZ. Outlook is stable.
London, 06 May 2008 -- Moody's Investors Service has today assigned a B1 corporate family
rating to OJSC Chelyabinsk Tube-Rolling Plant ("ChTPZ"
or the "Company"), one of the leading pipe and tube
manufacturers and the largest producer of seamless industrial pipes in
Russia. At the same time, Moody's Interfax Rating Agency,
which is majority owned by Moody's, assigned a A2.ru
national scale rating ("NSR"). The outlook on all the
ratings is stable.
The B1 corporate family rating reflects a) a leading position of ChTPZ
in the concentrated Russian market for pipe and tubular products,
with the three key producers accounting for over 80% of the market;
b) strong creditworthy key customers (including Russian oil and gas majors)
and a strong growth momentum in demand supported by the need to replace
and modernize Russia's oil and gas pipeline infrastructure,
as well as strong growth in the economy; c) steady operating cash
flow generation; d) limited competition afforded by protective regulatory
measures, as well as e) additional benefits likely to be achieved
through the diversification into a higher-margin oil service business.
The rating also reflects a) a relatively modest size of the operations
comparing to the peer group; b) the expectation of an intermediate
weakening in the financial metrics during the build-out period
and the need to manage growth and high leverage in 2008-2009;
(c) operating risks associated with the substantial expansion and the
company's reliance on bank financing in the medium term; and
(d) a degree of uncertainty afforded by the plan to pursue acquisitions
in the oil services industry.
In 2004-2006, ChTPZ achieved a high growth in revenues which
was supported by a robust pricing environment, strong demand from
its main customers and by debt-financed acquisitions. The
Company is pursuing a broad expansion programme with the view to reinforce
its long-term competitive position and increase capacity and efficiency
of its main operations, as well as establish a stronger foothold
in higher-margin pipe products. The programme is supported
by a USD 1.2 billion capital investment in 2007-2009 that
is financed with long-term bank facilities and through reinvestment
of the operating cash flow. In addition, the Company is looking
to achieve growth through diversification into pipe and oil services business
and plans to make a number of bolt-on acquisitions in Russia to
build the new line of business.
To date, ChTPZ funded its growth through reinvestment of its operating
cash flows and a relatively limited indebtedness. Going forward,
the company's liquidity requirements will be driven by the on-going
acceleration of investment that underpins its long-term growth
strategy, with some refinancing needs in 2010. The expansion
is supported by c.USD 1 billion in committed facilities,
that typically include financial covenants. Moody's notes that
the degree to which the company executes its expansion strategy may influence
the level of the headroom under its financial covenants. The implementation
of the Company's acquisition strategy will also be contingent on
securing adequate funding.
The stable rating outlook reflects ChTPZ's resolute performance in 2005,
2006 and 1H 2007, as well as Moody's expectation that the strong
operating environment will continue to support solid operating cash flow
in relation to the accumulated debt, notwithstanding the company's
ambitious plans to have capital expenditure in the next three years at
well above depreciation levels in line with its modernisation programme.
Moody's expects the company to continue to maintain its moderate financial
policies and its demonstrated disciplined approach to acquisitions in
the medium term with leverage sustained between x2.0 and x3.0
times EBITDA through the cycle. The stable outlook also reflects
the expectation that the Company will continue to address its liquidity
needs in a timely and proactive manner.
NATIONAL SCALE RATINGS
Moody's Interfax Rating Agency's National Scale Ratings (NSRs) are intended
as relative measures of creditworthiness among debt issues and issuers
within a country, enabling market participants to better differentiate
relative risks. NSRs in Russia are designated by the ".ru"
suffix. NSRs differ from global scale ratings, as assigned
by Moody's Investors Service, in that they are not globally comparable
to the full universe of Moody's rated entities, but only with other
rated entities within the same country.
ABOUT MOODY'S AND MOODY'S INTERFAX
Moody's Interfax Rating Agency specialises in credit risk analysis in
Russia and is 51% owned and controlled by Moody's Investors Service,
a leading provider of credit ratings, research and analysis covering
debt instruments and securities in the global capital markets.
Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE:
MCO), which reported revenues of US$1.4 billion in
2004, employs approximately 2,500 people worldwide and maintains
offices in 19 countries. Further information is available at www.moodys.com.
ChTPZ produced c.1.76 million tones of steel pipes in 2006
and reported USD 2.2 billion in revenues and USD 358 m in EBITDA.
The Company operates two facilities Chelyabinsk Tube-Rolling Plant
("ChTPZ") and Pervouralsky Tube-Rolling Plant ("PNTZ").
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
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No Related Data.
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