ACRA assigns BB+(RU) to KORTROS LLC., outlook Stable

ACRA has assigned BB+(RU), outlook Stable, to KORTROS LLC. (hereinafter, the Company), a parent company of RSG International Ltd (ACRA rating BB+(RU), outlook Stable) and Russian holding company of KORTROS Group.

The credit rating of KORTROS LLC. is affected by the very high industry risk and low debt service and cash flow assessments. On the other hand, the rating is backed by the strong operating profile, the strong liquidity and the high likelihood of support from the key shareholder, the RENOVA Group.

Key assumptions

  • Construction projects will be completed and sales targets will be met as planned;
  • ACRA estimations include only projects under construction and projects to be commissioned in accordance with the current financial plan of the Company;
  • Prices in the primary real estate market of Moscow will not change significantly.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • An increase in the weighted average ratio of FFO before net interest payments to interest payments above 2.5х;
  • A decrease of the ratio of net debt to FFO before net interest payments below 3.5x.

A negative rating action may be prompted by:

  • FFO before net interest payments to interest payments ratio declines below 1.0х;
  • Residential real estate prices decline by more than 15% in 2019–2020, while prices for construction works and materials increase as projected;
  • Access to external liquidity sources worsens considerably;
  • Regulatory changes capable of affecting the Company’s performance.

Rating components

Standalone creditworthiness assessment (SCA): bb.

Support: 1 notch up.

Issue ratings

No outstanding issues have been rated.

Regulatory disclosure

The credit rating has been assigned to KORTROS LLC. under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation, the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities, and the Methodology for Analyzing Member Company Relationships Within Corporate Groups.

The credit rating has been assigned to KORTROS LLC. for the first time. The credit rating and its outlook are expected to be revised within one year following the rating action (November 9, 2018).

Disclosure of deviations from the approved methodologies: the resulting credit rating was determined not in line with the Methodology for Analyzing Member Company Relationships Within Corporate Groups. The level of support was assessed as it would be for a non-formalized group due to a lack of information in determining the credit rating of the supporting organization.

The assigned credit rating is based on the data provided by KORTROS LLC., information from publicly available sources, as well as ACRA’s own databases. The credit rating is solicited, and KORTROS LLC. participated in its assignment.

No material discrepancies between the provided data and the data officially disclosed by KORTROS LLC. in its financial statements were discovered.

ACRA provided no additional services to KORTROS LLC. No conflicts of interest were discovered in the course of credit rating assignment.

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