January 19, 2017 |
|Dagong Global Credit Rating (Hong Kong) Co., assigned its “BBB” long-term global scale issuer credit rating to Russian Highways State Company (“Avtodor”). The outlook is stable.|
The rating reflects our assessment of the Russian federal government’s credit profile and we consider its willingness to provide financial and managerial support to the company, especially in the event of financial distress, as very strong.
The stable outlook reflects our view that the Russian federal government’s financial and managerial support for Avtodor as well as the company’s liquidity should mitigate the company’s relatively weak financial metrics (highlighted by rising leverage, inadequate EBITDA interest coverage), its small scale compared to its global peers, and uncertainties over traffic growth emanating from the on-going economic sanctions.
Avtodor is a non-profit organization set up by a specific law of the Russian Federation in July 2009 to develop, construct and operate highway networks in Russia. Based in Moscow, the company designs, constructs, operates, and maintains national highways and related road facilities. The company plays an important role in the Russian government's transportation policy as it is one of the two entities, specifically set up by the government in order to design, build and operate the country’s highway networks, with no competition from private operators. At the end of FY2015, the highway length was 2,860 km, of which 639.4km is in the toll section. The company acts as a developer/broker for the highway construction projects through a Public-Private Partnership (PPP) model.
We also expect the company’s financial leverage to rise in the next 3 years in relation to a potential federal budget cut in the next 2-3 years. However, we also forecast Avtodor’s liquidity to be abundant on its role as a payment agent between the federal government and concessionaires and on a long track record of state subsidies which have been available for the company.
More importantly, we believe the Russian Federal government has very strong willingness to support Avtodor. Our assessment reflects Avtodor’s systemic importance to the Russian federal government and its willingness to support the company on an on-going basis and in the event of financial distress. Avtodor’s budget plan was approved through 2020 and we expect the Russian federal government support for Avtodor to be forthcoming in the next 3 years.
|Full company name||Russian Highways State Company - AVTODOR|
|Country of risk||Russia|
|Country of registration||Russia|
|Industry||Construction and development|