MOSCOW (Standard & Poor's) Oct. 9, 2008-- Standard & Poor's Ratings Services said today that it had affirmed its 'BB' long-term corporate credit and 'ruAA' Russia national scale ratings on operating holding company Renova Holding Ltd. following a review of the company's financial position, portfolio composition, and strategy. The ratings were removed from CreditWatch, where they were placed with negative implications on June 3, 2008, as a result of uncertainty about the impact of high investment levels on Renova's leverage. After meeting with the company and a subsequent review, these concerns have been allayed. The outlook on the long-term rating is negative.
The ratings are constrained by portfolio concentration on a few large Russian assets, the low liquidity of most assets, dependency on the majority shareholder, and growing leverage as a result of the group's investment activity. The ratings are supported by Renova's successful growth while maintaining a strong balance sheet, and progress in improving portfolio diversity and liquidity.
Renova's core assets are a 12.5% stake in Russian oil company TNK-BP International Ltd. (BB/Stable/B) and a 6.7% stake in aluminum producer United Company RUSAL (not rated). They are cash generative and of good credit quality by Russian standards, but they are also mature and fairly illiquid.
Renova is owned by Victor Vekselberg and is his key financial vehicle. The shareholder has demonstrated his flexibility with regard to dividends and equity contributions through 2008. Despite his positive track record and the presence of an experienced and professional management team, we believe that Renova could be dependent on his political and business standing in the Russian context.
The negative outlook reflects our concerns about the increasingly challenging market conditions in which the group is likely to operate in the coming years. Renova's ability and willingness to adhere to its financial policy targets in this environment has not yet been tested.
|
