RPT-Fitch withdraws Creative's 'B-(EXP)'/RWN planned bond rating
(Repeat for additional subscribers)
Sept 26 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has withdrawn OJSC Creative Group Public Limited's expected senior unsecured rating of 'B-(EXP)'/'RR4' on Rating Watch Negative (RWN) applicable to a planned Eurobond issue. The RWN reflected the sensitivity in the expected recoveries for bondholders subject to the amount of the bond issued and the corresponding senior secured leverage remaining in the capital structure.
Since the bond issuance is no longer going ahead in the near term as Creative has managed to extend its debt maturities, the expected bond rating is no longer applicable.
Fitch currently rates Creative's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B-' with a Positive Outlook.
KEY RATING DRIVERS
Rating Dependent on Deleveraging
The Positive Outlook on the IDR factors in the expected deleveraging path prompted by improving funds from operations and a reduction in combined capex and working capital investments by 2015 as the latest investments in sunflower crushing capacity mature. It also reflects the rising share of export revenues and hence foreign currency receipts that support Creative's financial flexibility in the event of a domestic currency depreciation minimising any material currency mismatch between sales/profits and debt.
Despite its relatively strong business profile for the rating, credit metrics are weak compared to the peer group. We expect FFO adjusted leverage to improve substantially in 2013 to 4.0x (2012: 5.0x) and FFO fixed charge cover to 2.4x (2012: 2.2x) driven by the expected profit contribution from the recently commenced facilities.
Creative extended the maturity of a large portion of its debt in June 2013 with local banks. Excluding any drawn amounts under its working-capital facilities (PXF lines), Fitch estimates debt repayments until the end of 2014 will be approximately USD60m. Despite the expectation of still negative FCF this year, cash balances of USD120m by end-2012, access to liquid inventories and scalable capex plans should support near-term liquidity.
Positive: Future developments that could lead to positive rating actions include:
- FFO of at least USD200m
- Evidence of stabilising free cash flow and maintaining conservatively funded expansion plan
- FFO adjusted leverage below 4.5x by FYE13
- FFO fixed charge cover comfortably positioned in the 2x- 2.5x range
Negative: Future developments that could lead to negative rating action (including a revision of the Outlook to Stable) include:
- Consistent drop of EBITDA margin below 15% in the next two years combined with a deterioration of liquidity (measured as available cash plus next year's CFO less maintenance capex totalling less than 80% of short-term maturities excluding the PXF line)
- FFO adjusted leverage remaining in the 5x - 5.5x range
- FFO fixed charge coverage below 2.0x
- Google bus blocked in San Francisco gentrification protest
- Tearful Thai PM urges protesters to take part in election
- North Korea's 'reign of terror' worries South's leader
- Chinese hackers spied on Europeans before G20 meeting: researcher
- Leaders gather, thousands sing in rain in farewell to Mandela |