London, 11 April 2012 -- Moody's Investors Service has today changed the outlook to stable from
negative on Raspadskaya, OAO's (Raspadskaya) B1 corporate
family rating (CFR) and at the same time assigned a (P)B1 rating to Raspadskaya's
proposed issuance of loan participation notes (LPNs). The stabilisation
of the outlook follows the resolution of the company's refinancing
issues, as it recently secured long-term bank funding sufficient
to finalise its share buyback programme and to repay its May 2012 LPNs
at maturity.
RATINGS RATIONALE
-- RATIONALE FOR THE STABLE OUTLOOK ON THE B1 CFR
Moody's says that the stable outlook reflects Raspadskaya's
strong credit metrics, relatively low levels of debt and a strong
liquidity profile with manageable debt maturities.
Raspadskaya recently agreed on credit facilities from Raiffeisenbank for
USD150 million and from Sberbank for USD300 million. With these
facilities in place -- in addition to the cash and deposits
of USD260 million as of 31 December 2011 -- Raspadskaya
has adequate liquidity to fund the upcoming significant cash outflows
stemming from the share buyback and LPN maturity.
Moody's understands that the credit facilities from Raiffeisenbank
and Sberbank are primarily to be used for current investment programmes
and reconstruction of the Raspadskaya mine and also provide a safety net
for the share buyback in case the company does not (or cannot) refinance
the LPNs maturing in May 2012 with a new LPN issuance. The new
credit facilities contain standard covenants and are secured by the surety
agreements from the group's operating companies.
The B1 CFR reflects Raspadskaya's relatively low operating costs,
conservative capital structure and consistently strong credit metrics.
An undersupply of premium met coal and historically high prices have enabled
Raspadskaya to be cash flow generative, even as its shipments have
been reduced and it absorbs extraordinary repair and reconstruction costs
related to its principal mine, Raspadskaya. The rating is
constrained by the company's dependence on one commodity and a heavy dependence
on the steel industry -- both of which are volatile --
its small size and narrow operating footprint. Raspadskaya's credit
metrics position the company strongly in its current rating category.
-- RATIONALE FOR THE (P)B1 RATING OF THE LPNs
Moody's has assigned a provisional (P)B1 (LGD4, 50%) rating
to the proposed US dollar-denominated LPNs to be issued by Raspadskaya
Securities Ltd., and on-lent to the operating company
Raspadskaya, OAO. The maturity, size and pricing of
the notes are subject to the prevailing market conditions at the time
of placement.
The proposed LPNs are subject to various restrictions and financial covenants,
including a Debt/EBITDA incurrence ratio of 3.0x and limitations
regarding additional indebtedness.
Moody's issues provisional ratings in advance of the final sale of securities
and these reflect Moody's credit opinion regarding the transaction only.
Upon a conclusive review of the final documentation, Moody's will
endeavour to assign definitive ratings to the proposed senior unsecured
notes. Definitive ratings and assigned LGDs may differ from provisional
ones.
WHAT COULD MOVE THE RATINGS UP/DOWN
Moody's says that upward pressure would develop on the ratings if the
company (i) continues to consistently generate positive free cash flows
and accomplish its business-plan targets; (ii) further diversifies
its customer base; and (iii) enhances the consistency of its financial
policies and strengthens its liquidity management.
Negative pressure would develop on the ratings if (i) the company's ability
to generate ongoing, positive free cash flow is threatened;
(ii) outstanding repair work at the Raspadskaya mine is not completed
on time or on budget, leading to material deterioration of financial
metrics; or (iii) there is a material shift in the company's
leverage profile and/or deterioration of financial metrics. The
latter could be triggered by the company's adoption of aggressive
financial policies, including sizable dividend distributions,
share buy-backs or debt funded M&A transactions.
RATING METHODOLOGIES
Please see the ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The principal
methodology used in rating Raspadskaya was the Global Mining Industry
Methodology published in May 2009. Other methodologies used include
Loss Given Default for Speculative-Grade Non-Financial Companies
in the U.S., Canada and EMEA published in June 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Raspadskaya is a compact Russian coking coal producer operating in the
Kuzbass Basin in the Kemerovo region. In 2011, the company
mined 6.3 million tonnes of coal and sold 3.7 million tonnes
of clean coal, all in the domestic market. Revenues for 2011
were USD 726 million, which is in line with 2010 numbers.
The company is controlled by management and Evraz (rated Ba3, stable
outlook) through equal stakes in Corber Enterprises Ltd.,
which holds an 80% stake in Raspadskaya.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
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to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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
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Steven Oman
Senior Vice President
Corporate Finance Group
Moody's Investors Service Ltd.
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David G. Staples
MD - Corporate Finance
Corporate Finance Group
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Moody's changes Raspadskaya's outlook to stable from negative; (P)B1 assigned to Raspadskaya's LPNs