Fitch Places LLC DeloPorts on Rating Watch Negative
OREANDA-NEWS. Fitch Ratings has placed LLC DeloPorts' Long-term Issuer Default Rating (IDR) of 'BB-' and DeloPorts' RUB3bn unsecured bond rating of 'BB-' on Rating Watch Negative (RWN).
The RWN reflects uncertainty on DeloPorts' corporate structure due to a possible sale of a 49% stake in one of the company's key subsidiaries - container terminal NUTEP - to DP World (BBB-/Positive), one of the four largest container port operators globally based on volume.
In resolving the RWN Fitch will assess the extent to which the sale transaction will impact legal, operational and strategic ties between DeloPorts and its subsidiaries and the ability of the holding company to service its bond in the context of the presence a strong minority shareholder.
KEY RATING DRIVERS
Fitch rates LLC DeloPorts by notching down from the group's consolidated credit profile assessed at 'BB'. A one-notch differential currently reflects insufficiently strong legal ties between the parent and the subsidiaries and some ring-fencing features due to the presence of minority shareholder at JSC KSK (the grain terminal, where DeloPorts holds 75% minus one share).
In Fitch's view, the inclusion of a strong minority shareholder in NUTEP's corporate structure and the potential introduction of ringfencing features may result in further weakening of legal, operational and strategic ties between DeloPorts and NUTEP, thus diminishing its accessibility to and flexibility with regard to NUTEP's cash flows, particularly when it comes to paying interest and repaying the principal on the RUB3bn bond issued by DeloPorts in December 2015.
On the other hand, Fitch regards the presence of DP World as a positive development for NUTEP from an operational perspective as DP World will lend its experience as a strong global container port operator.
Fitch expects to resolve the RWN when the details on the transaction are known. If the final deal structure has no impact on the legal, operational and strategic ties between DeloPorts and NUTEP and DeloPorts' ability to service the bond, Fitch will affirm the ratings.
Should the sale of 49% of NUTEP lead to a further weakening of legal, operational and strategic ties between DeloPorts and NUTEP as well as potential deterioration of the financial position of DeloPorts, the ratings may be downgraded.
SUMMARY OF CREDIT
LLC DeloPorts is a privately-held Russian holding company that owns and operates several stevedoring assets in the largest Russian port of Novorossiysk. Its two main subsidiaries are the container terminal NUTEP (where DeloPorts currently holds 100%) and the grain terminal KSK.