Press Releases / 09.12.2014

Press Release as of 09.12.2014


CJSC AK&M Rating Agency assigned an 'A' tier 3 national scale credit rating to producers' cooperative society INTERFLORA COOPERATIVE AGROINDUSTRIAL FIRM. The outlook is stable.

The 'A' rating indicates that producers' cooperative society INTERFLORA COOPERATIVE AGROINDUSTRIAL FIRM (hereinafter also: Interflora) qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.

Interflora is currently implementing a housing estate construction project in Moscow.

We regard the high profitability, the healthy and growing assets, the low relative share of debt receivable as the positive rating drivers for the Company.

The Company's core asset is the long-term leasehold of two land plots located at: Soldatsky per. unit 26, Lefortovo intra-city municipal unit, Moscow. The right to lease these plots from the city property department of Moscow is valid until February 2019. Interflora leases the land plots with a view to design and build a multifamily housing estate consisting of two 17-storey buildings. The use of leasehold instead of freehold enables the Company to optimize the current expenses while providing it with an exclusive option to acquire the title to the land plot at state prices.

The project will be implemented in the oldest and historically valuable part of the Russian capital where the favorable location offers significant benefits.

Our project efficiency review shows that the project is quite profitable. The fairly high internal rate of return / IRR (37.7%) is an evidence of the appreciable efficiency and high potential of the project. Total EBITDA accrued in 2014-2017 is projected at RUB 2.1 billion.

We are pleased to see Interflora's assets grow steadily since 2012. As of the last reporting date (September 30, 2014) the Company's assets soared 12 times compared with the start of the year, reflecting the overall expansion of the Company's business. Assets have reached RUB 405,961 thousand.

Another positive signal for Interflora's rating is the low share of debt receivable in the structure of assets (8.7% as of September 30, 2014), with an obvious positive downward trend (54.5% as of January 1, 2014). The absence of overdue accounts payable is quite commendable in terms of the financial discipline implying that the risks of illegal diversion of current assets are insignificant.

Interflora's debt is wholly denominated in Russian rubles, which, under current economic conditions, means low forex risks and is naturally recognized as a powerful argument essentially supporting its rating.

Besides, we note the upward price trend in the housing market of Moscow. The average price per square meter of housing property in the new homes market increased by 17% over the period from January 1, 2014 to October 30, 2014. Given the persisting geopolitical tensions and the ruble depreciation trend, there are no objective reasons for a substantial decline of housing prices.

At the same time, the low business diversification and growing debt burden are constraining the credit rating of Interflora.

As long as Interflora is implementing only one housing construction project, its business diversification is rather poor, which limits the Company's income source diversification opportunities and spells higher risks of a failure to meet the sales targets in case the housing market faces a major decline.

Interflora is facing a heavy and growing debt burden. For the 9-month period in 2014, the Company's outstanding loan balance increased by 171.1% to RUB 75.4 million, which has impaired its financial independence (equity to total assets ratio) and financial stability.

Full Company name: producers' cooperative society INTERFLORA COOPERATIVE AGROINDUSTRIAL FIRM.

Interflora was registered by the Moscow Registration Chamber of the Government of Moscow on December 19, 1996, OGRN (primary state registration number): 1047722006200.

This press release is based on the Statement of assignment of a credit rating to producers' cooperative society INTERFLORA COOPERATIVE AGROINDUSTRIAL FIRM.

The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

CJSC Analysis, Consulting and Marketing Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.


CJSC AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.