Press Releases / 23.06.2015
Press Release as of 23.06.2015
CJSC Wastes Management
AK&M Rating Agency affirmed the 'A+' national scale credit rating of bonded loan 02 issued by CJSC Upravlenie otkhodami, with a stable outlook.
The 'A+' rating indicates that bond issue 02 (registration no. 4-02-76600-N) qualifies as a highly creditworthy bonded loan. The risk of a failure to meet obligations in time is insignificant.
Bond issue 02 is aimed at 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 1, 2014. This agreement determines all aspects of the relationship between the authorized regional authorities and CJSC Upravlenie otkhodami and formulates the parties' rights and obligations during the implementation of this agreement. The concessionary agreement envisages a project payback period of 7 years and 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 project profitability.
On September 23, 2014, CJSC Upravlenie otkhodami registered bond issue 02 maturing on June 15, 2025, with a total face value of RUB 1,000,000,000. The issue was placed on December 2, 2014.
A follow-on issue of bonded loan 02 of CJSC Upravlenie otkhodami with a total face value of RUB 700,000,000 will be placed in the third quarter of 2015. The coupon payment and principal debt repayment terms are expected to be identical to those applying to the principal issue of bonded loan 02.
The key positive rating driver for bonded loan 02 of CJSC Upravlenie otkhodami is the strong rating position of the issuer: on November 24, 2014, CJSC AK&M Rating Agency assigned an 'A+' national scale credit rating to the issuer, with a stable outlook.
The main positive rating driver for CJSC Upravlenie otkhodami and its bonded loans is the availability of actual 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.
Other positive rating drivers for bonded loan 02 of CJSC Upravlenie otkhodami are the sufficient positive cash flows to cover the debt service and repayment obligations, the high earning power of the project, the low risks incidental to the construction and operation.
One of the key features 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 principal debt repayment in 2019 in equal installments (14.3% of the loan amount per year). This, starting from 2020, will gradually reduce interest payments. 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.
At the same time, we regard the generally higher debt burden on the Issuer arising from bonded loan 02 as an additional risk factor constraining the rating.
Other negative signals putting pressure on the credit rating of bonded loan 02 of CJSC Upravlenie otkhodami are mainly related to the macroeconomic uncertainty in Russia (with an ensuing risk of higher debt servicing costs) and administrative factors (especially those capable of affecting the key tariff approval and annual adjustment process).
The risk of lower-than-projected incomes due to the poor collectability of utility payments also impairs the rating of issue 02. 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 bonded loan 02 of 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: (495 916-70-30, fax: (499 132-69-18.