|
|
|
|
RAPAPORT... Standards and Poor’s (S&P) has reinstated its long-term corporate credit rating for ALROSA, offering a positive outlook for the Russian diamond mining company. S&P suspended its ALROSA rating in April 2009 due to a lack of current operating and financial data from the miner, but said on Wednesday that it had since received sufficient data to assess ALROSA’s ratings.
The current long-term rating of "B+" was based on ALROSA’s standalone credit profile and a “high likelihood that the government of the Russian Federation would provide timely and sufficient extraordinary support top ALROSA in the event of financial distress,” S&P explained.
The likelihood of a government bailout reflects ALROSA’s important role in the Russian economy, as well as its strong links to government, which has a controlling, 50.2-percent stake in the company and a number of senior officials on the ALROSA board.
The B+ rating further indicates that it believes the company has the capacity to meet its financial obligations, but that adverse business, financial or economic conditions could impact that ability. S&P gave ALROSA a short-term credit rating of "B," which has similar implications.
S&P's standalone credit rating of ‘CCC+’ for ALROSA was based on its assessment of ALROSA’s business risk profile as “weak” and its financial risk profile as “highly leveraged,” the ratings agency said.
“ALROSA's business risk profile is constrained by the commodity-type nature and capital-intensiveness of the diamond mining industry, which was exacerbated by the weak demand for rough diamonds in 2009,” S&P explained in a statement. “Business risk is further constrained by the harsh operating conditions in Yakutia, where ALROSA's operations are concentrated.
On the up side, ALROSA’s risk profile is supported by its strong position in the diamond industry through a 25 percent market share and its substantial, high-quality reserve base. Negatives include ALROSA’s “very weak liquidity in our view and a highly leveraged capital structure,” S&P spokespersons noted.
S&P credit analyst Andrey Nikolev said that he expects ALROSA’s debt leverage to gradually decrease, though he stressed that this will depend on the stabilization of conditions in the diamond market.
“The positive outlook reflects the possibility of an upgrade in the next six to 12 months, if ALROSA is able to meaningfully improve its liquidity through long-term debt issuance and if diamond-market conditions remain stable,” Nikolaev said.
ALROSA ended 2009 with long-term debt of $3.28 billion.
|
|
|
|
|
|
|
|
|
|
Previous Item
| Back to List |
Next Item
|
|
|
|
|
|
|
|
|