Fitch Has Assigned STLC Long-Term Issuer-Default Ratings
OREANDA-NEWS. Fitch Ratings-London-16 June 2016: Fitch Ratings has assigned Russia-based State Transport Leasing Company (STLC) Long-Term Issuer-Default Ratings of 'BB-' with Negative Outlooks.
STLC's Long-Term IDRs of 'BB-', Support Rating of '3' and Support Rating Floor of 'BB-' reflect the moderate probability of support, in case of need, the company could receive from the Russian sovereign (BBB-/Negative). In assessing potential support, Fitch views positively: (i) the 100% state ownership; (ii) the company's role (albeit somewhat limited) in state programmes to support the public transport sector and domestic aircraft manufacturing; and (iii) the recent track record of capital injections (RUB35bn in 2015, equal to 3.5x end-2014 equity; a further RUB30bn in 2016 is probable).
However, the timing and the amount of support (especially capital) could be constrained by a potentially lengthy and onerous budgetary process (unplanned capital injections would need to be approved as amendments to the federal budget). In addition, Fitch expects the company's currently low leverage to increase substantially, which could raise the cost of potential support.
The Negative Outlook reflects that on Russia's sovereign ratings. A downgrade of STLC may result from a weakening of the ability or propensity of the Russian authorities to provide support, which could be reflected, for example, in the downgrade of the sovereign Long-Term IDR. Rapid growth with a sharp increase in leverage beyond Fitch's current expectations, or significant corporate governance risks, could also be credit-negative.
An upgrade of STLC, although unlikely in the near-term, would be contingent on an upgrade of the Russian sovereign or a significant improvement in its standalone profile (e.g. further sizable capital injections, diversification of the company's business and improvement in its profitability). A more significant policy role for STLC with respect to implementation of state programmes to support the Russian transportation sector, underpinned by sufficient capital provided by the authorities, could also be positive for the ratings.
STLC's senior debt ratings are likely to move in tandem with the company's Long-Term IDRs and National Rating.