(Repeat for additional subscibers)
Jan 22 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Russia-based 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 provided at the end of this rating action commentary.
KEY RATING DRIVERS
In line with Fitch's parent subsidiary linkage methodology, SCAC's ratings are
notched down three levels from the ratings of its ultimate majority shareholder,
the Russian government (BBB/Stable). The three-notch differential reflects the
companyâ€™s strong links to the state but also the lack of explicit state
guarantee for SCAC'€™s debt. However, a high proportion of SCACâ€™s debt comes from
state-owned banks while state-owned intermediate holding companies, including
United Aircraft Corporation and Sukhoi Aviation Holding, provide guarantees in
support of a material proportion of SCAC'€™s debt. The Outlook reflects that on
the Russian government.
Due to the governmentâ€™s shareholding, Fitch expects SCAC to continue to receive
support from the Russian state via further 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
Super Jet 100
The relationship between SCAC and the Russian government is underpinned by the
strategic importance of the Super Jet 100 (SSJ 100) aircraft to the state, which
is likely to be the entry point for other Russian commercial aircraft programmes
such as the MS21. 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. A stretch version of the SSJ 100 is likely to be delivered
Expected CIS and Emerging Market Demand
Other factors influencing the ratings are strong domestic demand for the SSJ 100
(152 orders taken to date plus 53 options/soft orders), the presence of
French-based engine manufacturer SNECMA as a risk-sharing partner on the SSJ 100
programme, and the long-term potential for cash flow generation. On a standalone
basis, however, SCAC is unlikely to be profitable in the next two years.
Future developments that could lead to positive or negative rating actions
-Changes to the sovereign ratings, which could prompt a review of the company's
IDRs, National Ratings and Outlook
-Any strengthening of state support, such as a provision of written guarantees
of SCAC's debt from the Russian Ministry of Finance, would likely lead to a
closer rating linkage between SCAC and the government. 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 foreign and local currency IDRs affirmed at 'BB'; Outlook Stable
Short-term foreign and local currency IDRs affirmed at 'B'
Foreign and local currency senior unsecured ratings affirmed at 'BB'
National Long-term rating affirmed at 'AA-(rus)'; Outlook Stable
National Short-term rating affirmed at 'F1+(rus)'