Press Releases / 28.11.2014
Press Release as of 28.11.2014
CJSC Wastes Management
AK&M Rating Agency assigned an 'A+' national scale credit rating to bonded loan 02 of CJSC Upravlenie otkhodami, with a stable outlook.
The 'A' rating indicates a high credit worthiness of bond issue 02. The risk of a failure to meet obligations in time is insignificant.
Bonded loan 02 of CJSC Upravlenie otkhodami in the amount of RUB 1 billion will be placed in December 2014. The bond maturity term is 3,834 days (10.5 years) with final maturity in June 2025. CJSC Upravlenie otkhodami will place the bonds with the aim of raising financial resources in the securities market to finance and implement the project of creating and subsequently operating a solid domestic waste treatment and disposal facility in the Chuvash Republic.
The project is being implemented pursuant to a 25-year concessionary agreement signed with the Chuvash Republic on July 01, 2014. This agreement determines all aspects of the relationship between the authorized regional authorities and CJSC Upravlenie otkhodami and regulates the parties' rights and obligations during the implementation of this agreement. The concessionary agreement envisages the capital investment of at least RUB 750 million with a payback period of 7 years. The agreement also provides for the complete reimbursement of the Company's investment and operating costs including financial expenses. The waste treatment tariff calculation set forth in the agreement is adjusted for a standard profit derivative of the amount of expenses, which ensures the profitability of the project.
The key determinant of the high credit rating for bonded loan 02 of CJSC Upravlenie otkhodami is the issuer's strong rating position.
The main positive rating driver for CJSC Upravlenie otkhodami and its bonded loans is the availability of guarantees from the regions enshrined in concessionary agreements. The agreements provide for the complete reimbursement of the Company's investment and operating costs including financial expenses. Under the agreements, the waste treatment and disposal tariff is based on the Company's expenses, adjusted for a standard profit derivative of the amount of expenses, which ensures the profitability of the Company's operations.
The main feature of the rated bond issue is the availability of an advanced principal repayment schedule. According to the Company's order dated November 18, 2014, CJSC Upravlenie otkhodami will start the advance repayment of the principal debt in 2019 in equal installments (RUB 143 million per year). This, starting from 2020, will gradually reduce interest payments, with a minimum level of ca. RUB 6 million in 2025. The bonded loan assumes ten coupon payments, the first of them equal to RUB 193 million falls on the longest coupon period of 639 days and is payable in 2016. The following coupon periods (until the last 10th coupon period in 2025) will be equal to 365 (366) days. The financial model analysis indicates the Company's ability to timely meet its financial obligations under the project in the Chuvash Republic with moderate volatility of the nominal macroeconomic parameters. Therefore, we do not regard the advanced repayment schedule for bonded loan 02 as an additional risk factor constraining the credit rating.
The credit rating of bonded loan 02 of CJSC Upravlenie otkhodami is mainly constrained by the inherent macroeconomic parameters of the financial model and administrative matters influencing, among others, the key tariff approval and annual revision process.
The risk of lower-than-projected incomes due to the poor collectability of utility payments also impairs the Company's rating. Long-term forecasts of utility payment collectability trends in the Chuvash Republic always have an element of uncertainty.
This press release is based on the Statement of assignment of a credit rating to CJSC Upravlenie otkhodami. The rating, along with any information and conclusions provided in this press release, only conveys our creditworthiness opinion 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.
AK&M 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 Analysis, Consulting and Marketing Rating Agency
Ul. Gubkina 3, Moscow, Russia
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.