TEXT-Fitch affirms Sukhoi Civil Aircraft at 'BB';stable outlook

Wed Jan 23, 2013 4:52am EST

Related Topics

(The following statement was released by the rating agency)

Jan 23 - Fitch Ratings has affirmed Sukhoi Civil Aircraft JSC's (SCAC) Long-Term Issuer Default Ratings (IDR) at 'BB' with a Stable Outlook. A full list of rating actions is at the end of this release.

KEY DRIVERS

- State Support:

In line with Fitch's parent subsidiary linkage methodology, SCAC's ratings are driven by its strong links to its ultimate majority shareholder, the Russian government ('BBB'/Stable). Due to its shareholding, Fitch expects SCAC to continue to receive support from the Russian state via additional equity injections over and above what has already been contributed. Any waning, or perceived waning, of that support, is likely to lead to SCAC's ratings being further notched down from those of the sovereign.

- Super Jet 100:

This relationship is underpinned by the strategic importance of the Super Jet 100 (SSJ 100) aircraft to the state. The SSJ 100 is the only product SCAC has delivered to date, although a business jet version has been launched and is scheduled to be delivered in 2014. SCAC can rely on the support of the Russian state for additional equity injections over and above what has already been contributed.

- Expected Emerging Market Demand Not Hindered by Indonesia Crash:

Other factors influencing the rating are the strong emerging market demand for the SSJ 100 (181 firm orders taken to date plus 75 options), which is unlikely to be negatively affected by the May 2012 crash of the SSJ 100 demonstrator flight in Indonesia, the cause of which was pilot error. Fitch notes that no orders have been cancelled as a result of the crash.

- Stable Outlook:

The Stable Outlook on the Long-Term IDR reflects that on the Long-Term foreign currency IDR of the Russian Federation.

RATING SENSITIVITY GUIDANCE:

Future developments that could lead to positive or negative rating actions include:

- Change to Sovereign Ratings:

As SCAC's IDRs and Outlook are driven by those of the Russian Federation, any change to the sovereign could prompt a review of the company's IDRs, National Ratings and Outlook.

- Degree of Sovereign Support:

The ratings and Outlook are also driven by the status of the support from the state. Any strengthening of this support, such as a provision of written guarantees of SCAC's debt from the Russian Ministry of Finance, would be likely to lead to a closer rating linkage. A weakening of support, such as a reduction in the state's shareholding in SCAC, or a waning commitment to the company's programmes, could lead to a widening of the rating gap between Russia and SCAC.

The rating actions are as follows:

Long-term IDR affirmed at 'BB'; Outlook Stable

Short-term IDR affirmed at 'B'

Long-term local currency IDR affirmed at 'BB'; Outlook Stable

Short-term local currency IDR affirmed at 'B'

Foreign currency senior unsecured rating affirmed at 'BB'

Local currency senior unsecured rating affirmed at 'BB'

National Long-term rating affirmed at 'AA-(rus)'; Outlook Stable

National Short-term rating affirmed at 'F1+(rus)'

FILED UNDER: