Fitch: Koks Group off RWN; 'B' Rating Affirmed
OREANDA-NEWS. Fitch Ratings has removed Russian pig iron company PAO Koks Group's (KOKS) ratings from Rating Watch Negative (RWN) and has affirmed the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'B' with a Negative Outlook. The full list of rating actions is at the end of this commentary.
The affirmation of the ratings and their removal from RWN reflect reduced refinancing risk, underpinned with a smoother debt maturity profile over the short term since it made a partial Eurobond repayment in June 2016.
The Negative Outlook is driven by a combination of deleveraging and remaining liquidity risks. In particular, we expect KOKS to deleverage, with funds from operations (FFO)-adjusted leverage falling below 4x after being 4.2x at end-2016, and to progress in obtaining more diversified and longer-term funding. Failure to progress in deleveraging and to achieve further liquidity improvements would result in a rating downgrade.Fitch considers KOKS' liquidity tight as it relies on undrawn committed short-term facilities and the company's ability to roll over already drawn funds in due course. KOKS's short-term debt fell to RUB25bn at end-1H16 (FYE15: RUB37bn) but remained a significant 51% of total RUB49bn debt. This short-term debt largely consists of revolving credit facilities (RCFs) withannual pay-down features. We consider them short term even though some are multi-year facilities with a record of regular prolongations.
Taking into account the diversity of RCF creditors and the available undrawn long-term debt of above RUB2bn at end-1H16, we expect refinancing risk to have become more appropriate for the current rating since the last review in March 2016, as a large Eurobond repayment was due in June 2016.