ACRA has upgraded the credit rating of KORTROS LLC (hereinafter, the Company), the parent company of RSG International Ltd and Russian holding company of KORTROS Group, to BBB(RU). The Company’s rating has been upgraded due to improved leverage and debt service indicators.
RSG International Ltd is the Company’s main asset. All the rating assessment factors of the Company are identical to those of RSG International Ltd (ACRA rating BBB(RU), outlook Stable). The Company’s credit rating is based on low leverage, strong liquidity and cash flow indicators, average debt service and profitability, the average assessment of the operating risk profile, as well as the high likelihood of support being provided by the key shareholders. The rating is constrained by the very high industry risk and the relatively small size of the Company’s operations.
KEY ASSUMPTIONS
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Construction projects to be completed and sales targets to be met as planned;
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ACRA’s estimates only include projects under construction and planned projects in accordance with the current financial plan of the Company;
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No significant decline in prices in the primary real estate market in 2022–2023.
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:
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Average weighted ratio of FFO before net interest payments to net interest payments increasing above 5.0х;
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Average weighted FFO before net interest payments exceeding RUB 5 bln and the current construction portfolio simultaneously exceeding 1 mln sq. m.
A negative rating action may be prompted by:
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Average weighted ratio of FFO before net interest payments to net interest payments declining below 2.5х;
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Average weighted adjusted FCF margin turning negative;
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Primary market residential real estate prices declining by more than 10% in 2022–2023;
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Regulatory changes that can have a significant negative impact on the Company’s performance.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): bbb-.
Support: SCA +1 notch.
ISSUE RATINGS
There are no outstanding issues.
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, Methodology for Analyzing Rated Entities Associated with a State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of KORTROS LLC was published by ACRA for the first time on November 12, 2018. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
Disclosure of deviations from the approved methodologies: the level of group support and the final credit rating were not determined in line with the Methodology for Analyzing Rated Entities Associated with a State or a Group. The level of support was assessed using an approach for an unidentifiable group due to a lack of information required to perform the creditworthiness assessment of the supporting entity.
The credit rating was assigned based on data provided by KORTROS LLC, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited, and KORTROS LLC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to KORTROS LLC. No conflicts of interest were discovered in the course of credit rating assignment.
