Dec 20 - Fitch Ratings has placed Slovensky Plynarensky Priemysel, a.s.'s (
SPP ) 'A-' foreign and local currency Long-term Issuer Default Ratings (IDR) on
Rating Watch Negative (RWN).
The rating action follows the resolution of the government of Slovakia
('A+'/Stable) regarding the ownership change of SPP and its key subsidiaries.
The government, which is the 51% shareholder of SPP, does not intend to exercise
its right to purchase the 49% of SPP owned by Slovak Gas Holding (SGH), in turn
owned by GDF Suez and E.ON Ruhrgas, which intend to dispose of their stakes in
Until the resolution was announced, Fitch assumed that any ownership change in
SPP would not change its internal group structure and cash flows and that
dividends would be paid up to 100% of net consolidated income. It now appears
that the government could eventually buy the 49% stake in SPP which may lead to
a restructuring of ownership of SPP's key cash flow generating subsidiaries
(Eustream, a.s. and SPP Distribucia, a.s.) by end-2013. This may in turn affect
SPP's cash flows and the way Fitch computes SPP's credit metrics, which may be
too weak for SPP's current ratings. Additionally, structural subordination of
SPP's creditors may also constrain its ratings.
The dividend policy may also be reviewed and lead to higher payments. However,
SPP's net debt to EBITDA is proposed to be limited at 2.5x. Fitch notes that SPP
currently has headroom compared with this limit (consolidated net debt to EBITDA
stood at 0.5x at YE11), but this may be exhausted depending on the actual
dividend payments and Fitch's adjustments reflecting the possible restructuring.
RATING SENSITIVITY GUIDANCE
Positive: The rating is currently on RWN. As a result, Fitch's sensitivities do
not currently anticipate developments with a material likelihood, individually
or collectively, of leading to a rating upgrade. Future developments that may,
individually or collectively, lead to positive rating action (affirmation and
removal from RWN) include:
- A new shareholder agreement and group structure supporting funds from
operations (FFO) net adjusted leverage below 2.5x, without significant debt
being raised at SPP's key subsidiaries.
Negative: Future developments that may, individually or collectively, lead to
negative rating action include:
- Changes in ownership of key subsidiaries leading to deconsolidation of
subsidiaries' earnings and/or structural subordination of SPP's creditors.
- Dividend policy changes leading to FFO net adjusted leverage beyond 2.5x.
SPP had adequate liquidity at end-July 2012 with cash balance of EUR326m and
available for drawing committed credit lines of EUR330m against short-term debt
Additional information is available on www.fitchratings.com. For regulatory
purposes in various jurisdictions, the supervisory analyst named above is deemed
to be the primary analyst for this issuer; the principal analyst is deemed to be
The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.
Applicable criteria, 'Corporate Rating Methodology', dated 8 August 2012, is
available at www.fitchratings.com.
Applicable Criteria and Related Research:
Corporate Rating Methodology