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13 Feb 2009
Moscow, February 13, 2009 -- Today Moody's Investors Services has downgraded the Ba3 corporate
family rating and Aa3.ru national scale rating of OAO Raspadskaya
to B1 and A1.ru respectively. At the same time, Moodys,
downgraded the rating for Loan Participation Notes due in 2012 and totaling
USD 300 million from Ba3 to B1. The outlook on all ratings remains
The rating action was prompted by a significant weakening in demand for
raw material including coking coal used in production of crude steel.
Recent negative macroeconomic developments resulted in much weaker demand
for steel products with a consecutive reduction in steel and raw material
prices. The strong reduction of coal prices is expected to lead
to a decreased profitability and cash flow generation for 2009 and possibly
Due to low payment discipline exercised by main customers, total
debt is likely to increase in order to support working capital needs.
In addition, the lower than expected cash flow generation is expected
to lead to an increased leverage in 2009 beyond the trigger for downgrade
of 2 to 2.5 times gross debt to EBITDA that the agency has set
for the rating category. In Moody's opinion this situation
is unlikely to be reversed in the next 12 months
The outlook for the coal market is highly challenging for non-integrated
coal producers like Raspadskaya. The company has a limited export
potential (73% is sold domestically in 1H 2008) and a high degree
of concentration on a limited number of main customers, including
MMK, NLMK and Evraz Currently, the company is aiming to improve
diversification of its customers' base and is actively seeking new
export opportunities. It is expected that the company will be further
negatively affected by the RUR devaluation as the output is priced in
roubles while debt is denominated in USD.
On the positive side, the company has highly efficient production
assets which would allow the company to compete by significantly reducing
prices while retaining sufficient profitability and cash flow generation.
The stable outlook reflects the current adequate liquidity position supported
by available cash and projected cash flow generation (including projected
cash inflow from the release of working capital that should come with
better payment discipline from its customers) as well as the relatively
lower amount of debt service in 2009.
The last rating action was on May 10, 2007 Moody's Investors Service
assigned a (P)Ba3 senior unsecured rating with a stable outlook to the
loan participation notes issued by Raspadskaya Securities Ltd.,
and on-lent to the operating company Raspadskaya OAO. At
the same time, Moody's Interfax Rating Agency, which is majority
owned by Moody's, assigned a Aa3.ru national scale credit
rating ("NSR") with a stable outlook to the company.
The principal methodology used in rating Raspadskaya was Global Mining
Industry, September 2005 (94364), which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating Raspadskaya can also
be found in the Credit Policy & Methodologies directory.
Raspadskaya is Russia's second largest coking coal producer and is among
the top 10 coking coal producers globally with a coal production volume
of 13.55 mln t in 2007 and 9.41 mln t in 2008.
The company's production assets consist of two underground mines,
one open-pit, a coal preparation plant, and one more
mine is currently under construction, as well as a coal transportation
network and a number of integrated infrastructure companies. All
the assets are located in Kuzbass Basin (Kemerovo region, Russia).
The company is controlled by management and the Evraz Group (rated Ba3,
stable outlook) through equal stakes in Corber Enterprises Ltd.
which holds an 80% stake in Raspadskaya. In 2007 the company
reported revenue of USD 784 million and USD 491 of EBITDA based on audited
consolidated financial statements. In 1H 2008 the company reported
revenue of USD 607 and USD 434 mln of EBITDA.
Eric de Bodard
Corporate Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgraded to B1 the existing Ba3 rating of Raspadskaya, Stable outlook.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Eastern Europe LLC
Telephone: +7 495 228 6060
Facsimile: +7 495 228 6091
No Related Data.
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