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S&P: Russian Fixed-Line Telco North-West Telecom (JSC) Affirmed At 'BB-/ruAA-'; Outlook Stable

January 21, 2008 | Cbonds

Standard & Poor's Ratings Services said today that it affirmed its 'BB-' long-term corporate credit and 'ruAA-' Russia national scale ratings on Russian regional fixed-line telecoms operator North-West Telecom (JSC) (NWT). The outlook is stable.

"The ratings are constrained by our expectation of deterioration in NWT's financial risk profile, heavily driven by a peak in capital expenditures scheduled for the next two years," said Standard & Poor's credit analyst Alexander Griaznov. "Limited revenue diversification and intense competition in the broadband market also limit the ratings."

At the same time, the ratings continue to benefit from NWT's leading position in traditional telephony, the improving efficiency of operations, and strengthening profitability. The ratings also take into account NWT's moderate debt levels and a historically prudent financial policy.

NWT's Total adjusted debt was Russian ruble 14.7 billion ($569.4 million) at June 30, 2007.

We expect NWT to maintain a resilient market position and continue focusing on improving efficiency.

We believe that increasing capital expenditures will put no significant pressure on the company's financial profile, which is characterized by moderate debt levels and a prudent financial policy.

"NWT's ability to manage its investments without material deterioration of financial risk, while maintaining sufficient liquidity, is a key rating driver over the next 18 months," said Mr. Griaznov.

At this rating level we expect NWT to maintain its debt at no more than 2.2x EBITDA.

We will closely monitor NWT's refinancing progress in 2008. The ratings could come under pressure should the liquidity position become increasingly exposed. Any significant debt-financed acquisition in the context of aggressive network upgrades would also place pressure on the ratings.

Given our expectation of substantial negative cash flows, increased leverage, and acquisition risks, there is no rating upside at present.

Company: Rostelecom - North West

Full company nameRostelecom - North West
Country of riskRussia
Country of registrationRussia


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