OREANDA-NEWS. Fitch Ratings has assigned Alfa Holding Issuance plc's (AHI) RUB1.8bn senior issue of limited recourse loan participation notes (LPNs) a final 'BB(emr)' rating.

The notes are to be repaid in several instalments with the last one on 28 August 2018. The coupon is floating, referencing various market instruments. Fitch appends a subscript (emr) to the rating to highlight that the variability of the coupon created by the embedded market risk is excluded from the rating assigned to the notes.

AHI, an Irish SPV that issued the bonds, immediately on-lent the proceeds to Cyprus-based ABH Financial Limited (ABHFL, BB/Negative), as the ultimate borrower under the notes. The terms of the loan agreement between AHI and ABHFL mirror those of the notes, so the notes repayment will be made with proceeds from respective loan repayments by ABHFL.

KEY RATING DRIVERS
The rating of the issue is driven by ABHFL's Long-term Issuer Default Rating (IDR) of 'BB'. The issue is not guaranteed by Alfa Bank (BB+/Negative), the main operating subsidiary of ABHFL.

RATING SENSITIVITIES
The rating of the issue is likely to move in tandem with ABHFL's Long-term IDR, which in turn is currently notched down once from that of Alfa Bank. The Negative Outlook on Alfa Bank's Long-term IDRs mirrors that on the Russian sovereign rating, and reflects the potential for the bank's Viability Rating (VR), which indicates standalone strength, to be downgraded due to pressure on financial metrics from the now recessionary environment.

At the same time, Alfa remains the highest-rated Russian privately-owned bank, reflecting its sound management and track record of navigating through past Russian crises, and its currently strong balance sheet and solid financial metrics.

If ABHFL significantly increases leverage, which is currently not a base case expectation, both ABHFL's and the issue ratings may be notched further down from Alfa Bank's rating.