London, 18 April 2017 -- Moody's Investors Service has today assigned a Ba1 rating with a loss
given default assessment of LGD4 to the proposed senior unsecured USD
loan participation notes (LPNs) to be issued by, but with limited
recourse to, PhosAgro Bond Funding Limited (Ba1 stable), a
company incorporated as a designated activity company under the laws of
Ireland.
The outlook on the ratings is stable.
PhosAgro Bond Funding Limited will issue the notes for the sole purpose
of financing a loan to PJSC PhosAgro (PhosAgro, Ba1 stable),
pursuant to a loan agreement between the two companies. The loan
will be additionally guaranteed by PhosAgro's major operating subsidiaries,
JSC Apatit and JSC PhosAgro-Cherepovets (both unrated), which
account for more than 80% of the group's consolidated revenue,
EBITDA and assets.
Moody's expects that the issuance proceeds will be primarily used for
repayment of part of PhosAgro's existing bank debt.
RATINGS RATIONALE
The notes' rating of Ba1 is at the same level as PhosAgro's corporate
family rating (CFR), which reflects Moody's assumption that the
notes will rank pari passu with other unsecured and unsubordinated obligations
of PhosAgro's group, including the Ba1-rated outstanding
$500 million LPNs due 13 February 2018 of PhosAgro Bond Funding
Limited.
Moody's expects that the issuance proceeds will be mostly used for early
repayment of part of the group's existing bank debt maturing in 2017-20.
Therefore, the new notes placement will not materially increase
PhosAgro's leverage.
PhosAgro's Ba1 CFR reflects a high degree of robustness in its financial
profile, supported by (1) PhosAgro's significant global market
presence and focus on premium priced fertilizers; (2) self-sufficiency
in key raw materials and respectively low cost base, leveraged by
the weak rouble, and securing high margins through the cycle;
and (3) solid liquidity.
The CFR is constrained by PhosAgro's exposure to Russia's
macroeconomic environment and is at the same level as Russia's sovereign
rating and the foreign-currency bond country ceiling of Ba1.
PhosAgro remains exposed to Russia's environment, despite
the significant contribution of exports to revenue (70%),
given that all company's production facilities are located within
Russia.
In addition, the company's rating factors in its susceptibility
to the cyclical nature of the fertilizer industry, which is heightened
by its concentration in phosphate fertilizers and its smaller size when
compared to its global peer group.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook on PhosAgro's ratings factors in (1) the stable
outlook on Russia's sovereign rating and the positioning of the
country's sovereign ceiling; and (2) PhosAgro's solid
intrinsic credit quality.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Moody's could consider upgrading PhosAgro's ratings if we
were to upgrade Russia's sovereign rating and/or raise the foreign-currency
bond country ceiling, provided that there is no material deterioration
in operating conditions or company-specific factors, and
PhosAgro's largest upcoming Q1-2018 debt maturity is fully
addressed.
The ratings are likely to be downgraded if (1) there is a downgrade of
Russia's sovereign rating and a lowering of the foreign-currency
bond country ceiling; (2) the company's liquidity profile deteriorates;
and/or (3) the company fails to deliver adjusted RCF/debt above 15%
and adjusted debt/EBITDA below 3x on a sustainable basis.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Chemical Industry
Rating Methodology published in December 2013. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
Headquartered in Moscow, PhosAgro is a holding company of a group
of chemical companies engaged in the manufacture of phosphate and complex
fertilizers. In 2016, PhosAgro generated sales of RUB187.7
billion ($2.8 billion) and adjusted EBITDA of RUB73.6
million ($1.1 billion).
The company generates nearly a third of its revenues from the Russian
market, whilst deriving the remainder from exports to 100 countries.
It is ultimately controlled by Mr. Andrey Guriev and his family
members, who have a voting stake of 48.48%.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Ekaterina Botvinova
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
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Victoria Maisuradze
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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