Fitch: Deloports' Bond Issue Should be Credit Neutral
DeloPorts expects to issue rouble-denominated bonds of RUB3bn (approximately USD46m) and has registered a bond prospectus. The bonds will have a bullet repayment with maturity of up to 10 years and will be unsecured.
When we assigned DeloPorts' rating, the holding company had no debt. Fitch noted that new debt issued by DeloPorts that would be subordinated to the existing debt of the subsidiaries and/or would result in our assessment of the debt structure as Weaker could be negative for the rating.
Based on a review of the anticipated bond terms, we do not expect any negative rating impact from the bond issuance. The bond will represent about 35% of the consolidated group's debt at YE2015, with the other 65% made up of bank loans at the operating subsidiaries NUTEP and KSK. The group's overall debt structure becomes somewhat weaker with the bond due to the bullet repayment style and associated refinancing risk, as well as the weakening of the covenant package. Positively, the bond's interest rate will be fixed, reducing the exposure of the overall debt to floating interest rate. On balance, we continue to regard the group's debt structure as Midrange.
The rating of the holding company DeloPorts is notched down from the consolidated profile (assessed at BB) by one notch in accordance with Fitch's 'Parent and Subsidiary Rating Linkage' criteria. This reflects the holding company debt's structural subordination and the legal ties between DeloPorts and its subsidiaries that are not sufficiently strong.
The group's financial performance based on actual 6M15 results and revised management's budget for the whole year is within Fitch's expectations. Consolidated debt/EBITDA is expected at 1.8x at YE15 with the issuance of the bond under Fitch's rating case.