RUR3 billion of rated debt affected
London, 22 November 2011 -- Moody's Investors Service has today withdrawn the Ba3 corporate
family rating (CFR) and probability of default rating (PDR) of Transportation
Investments Holding Limited (N-Trans). Simultaneously,
Moody's has assigned a CFR and PDR of Ba3 to N-Trans'
subsidiary Globaltrans Investment PLC (Globaltrans). Concurrently,
Moody's has affirmed the senior unsecured rating assigned to the
RUR3 billion domestic bond issued by Globaltrans' subsidiary New
Forwarding Company (NFC) and guaranteed by Globaltrans, at B1,
with a loss-given default assessment of 5 (LGD5/76%).
The bond rating is now linked to the CFR of Globaltrans rather than to
N-Trans, as previously. There are no changes to the
bond structure. The outlook on all ratings is positive.
RATINGS RATIONALE
Moody's has withdrawn the credit rating of N-Trans due to
business reasons. Please refer to Moody's Investors Service's
Withdrawal Policy, which can be found on the website, www.moodys.com.
The Ba3 CFR of Globaltrans reflects the company's (i) strong position
in the Russian freight rail transportation market, with a growing
market share and established base of blue-chip clients; (ii)
modern railcar fleet, with an average age of around seven years,
compared with the Russian industry average of around 18 years, balanced
by type of railcars and requiring low maintenance capital expenditure
(capex); (iii) sustainable financial performance, with a high
EBITA margin of 26.1% as of June 2011 resulting from continuing
cost control and sophisticated empty run management; (iv) strong
financial profile, with debt/EBITDA ratio of 1.7x and a retained
cash flow (RCF)/net debt ratio of 38.8% as of June 2011;
(v) solid liquidity, supported by stable operating cash flow and
a substantial cash balance; and (vi) manageable foreign currency
risk, as the company's foreign currency-denominated
debt represents a moderate 26% of its total debt.
At the same time, the rating factors in (i) the company's
relatively small size compared with Russian Railways and in an international
context, with 49,529 railcars in operation and USD1.6
billion of revenue as of June 2011; (ii) uncertainty surrounding
Globaltrans' long-term market position due to the potential
transformation of the competitive landscape following the partial privatisation
of Russian Railways' assets; (iii) the possibility of Globaltrans
making sizeable acquisitions, which could lead to its financial
metrics becoming weakened, particularly if these acquisitions coincide
with the deteriorated macro environment; (iv) significant customer
concentration, with more than 70% of Globaltrans' net
revenues from operating its rolling stock being derived from its 10 largest
customers; and (v) the company's overall exposure to an emerging
market operating environment with a less developed regulatory, political
and legal framework.
Moody's notes that the senior unsecured rating assigned to NFC's
bond issuance is one notch below the CFR. This difference reflects
the structural subordination of the bond to secured debt, which
comprised around 60% of the Globaltrans group's total debt
as of June 2011.
The positive outlook reflects the potential for an upgrade of Globaltrans'
ratings over the next 12-18 months should the company (i) demonstrate
sustainably strong financial metrics, with debt/EBITDA below 2.0x,
RCF/net debt above 35% and solidly positive free cash flow;
(ii) maintain an EBITA margin above 25%; and (iii) retain
its strong market position.
Negative pressure could be exerted on the rating if (i) debt/EBITDA increases
above 2.5x and RCF/net debt declines below 30% on a sustainable
basis; and (ii) there is a material deterioration in Globaltrans'
liquidity or market position.
PRINCIPAL METHODOLOGY
Globaltrans' ratings were assigned by evaluating factors that Moody's
considers relevant to the credit profile of the issuer, such as
the company's (i) business risk and competitive position compared with
others within the industry; (ii) capital structure and financial
risk; (iii) projected performance over the near to intermediate term;
and (iv) management's track record and tolerance for risk. Moody's
compared these attributes against other issuers both within and outside
Globaltrans' core industry and believes Globaltrans' ratings
are comparable to those of other issuers with similar credit risk.
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 this methodology.
Cyprus-based Globaltrans is one of the largest private railway
transportation groups operating in Russia, with a fleet of 49,529
railcars as of June 2011. In 2010, the company transported
around 64 million tones of various cargos and generated USD1.4
billion of revenue and USD0.5 billion of EBITDA (adjusted by Moody's).
The group's customers are large Russian blue-chip companies
operating mainly in the metals and mining, oil and oil products
industries. Globaltrans is a public company listed on the London
Stock Exchange since 2008.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant regulatory disclosures in relation
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
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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
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for the last rating action and the rating history.
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Artem Frolov
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Limited, Moscow Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
Telephone: +7 495 228 6060
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David G. Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536
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Moody's withdraws N-Trans' rating, assigns Ba3 to Globaltrans; positive outlook
