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S&P: Russian Discount Grocer Kopeyka Upgraded To 'B-/ruBBB' On Improved Financial Performance; Outlook Stable

June 29, 2010 | Standard & Poor's

MOSCOW (Standard & Poor's) June 29, 2010--Standard & Poor's Ratings Services said today that it raised its long-term corporate credit rating on Kopeyka, a Russia-based discount food retailer, to 'B-' from 'CCC+'. At the same time, we raised the Russia national scale rating to 'ruBBB' from 'ruBB'. The outlook is stable.

"The upgrade reflects an improvement in Kopeyka's liquidity position, still decreasing leverage, and the positive free cash flow generation achieved in 2009 and in 2008," said Standard & Poor's credit analyst Anton Geyze. "Operational performance was also robust in 2009, with the company's EBITDA margin, adjusted for operating leases, reaching 8.3%."

In May 2010, Kopeyka obtained a new Russian ruble (RUB) 4 billion (about $130 million) medium-term loan from Sberbank (not rated), which we believe has strengthened the company's liquidity position. Moreover, Kopeyka has maintained its short-term debt at close to 30% of total debt for the past several quarters, thanks to an improved debt maturity structure. This compares with short-term debt of more than 50% in 2007-2008.

Sales in 2009 increased by 17% year on year to RUB 54 billion, and EBITDA, adjusted for operating leases and nonrecurring items, reached RUB4.5 billion, as a result of management's initiatives to improve operational efficiency. As of year-end 2009, Kopeyka's ratio of adjusted debt to EBITDA improved to 4.5x, compared with 5.6x in 2008 and 7.3x in 2007, on the back of meaningful EBITDA growth and only a moderate increase in the company's nominal debt burden. The ratio of funds from operations to debt also improved to 12% in 2009, up from 9% in 2008 and 5% in 2007.

"The outlook is stable because it reflects our view that Kopeyka will maintain less aggressive liquidity management by refinancing upcoming maturities in a timely fashion and actively use medium-term debt instruments to maintain a favorable maturity structure," said Mr. Geyze. "The outlook also reflects our expectation that the company's financial policy will remain less aggressive than in previous years, in line with its statement to keep the reported ratio of net debt to EBITDA at about 3x."

Company: TD Kopeyka

Full company nameTD Kopeyka
Country of riskRussia
Country of registrationRussia
IndustryTrade and retail

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