ACRA AFFIRMS AAA(RU) TO JSCO “RZD”, OUTLOOK STABLE, AND AFFIRMS THE CREDIT RATINGS OF ITS BONDS

The credit rating of JSCo “RZD” (hereinafter, RZD or the Company) is on par with the financial obligations of the Government of the Russian Federation due to the very high assessment of support from the state and medium assessment of dependence on homogeneous risk factors.

RZD is a natural monopoly and one of the largest global railway companies, which owns and operates railway infrastructure, rolling stock and locomotives in Russia. The Russian Federation is the sole shareholder of the Company.

KEY ASSESSMENT FACTORS

The very high assessment of support from the state stems from the very high assessments of sub-factors such as Barriers and Limitations, Exclusiveness of Functions, Social Role, and Ownership, Control and Regulation, as well as a high assessment of the sub-factor Role in the Economy and Reputational Risks. At the same time, the sub-factor Guarantees or Other Support Channels received a medium score.

The Company’s activity does not involve any legal, economic or other barriers that prevent the state from providing support. The Company is a natural monopoly, the exclusiveness of which is based on, among other things, the fact that it owns and operates the entire federal public railway network, as well as the country’s largest operator of locomotives. The Company is an inseparable part of the national economy and is strategically important to the state. The Company’s tariff policy, which is approved by the Russian Government, is a decisive factor for many sectors of the economy. The main reason for this is the Company’s monopoly position and the lack of alternative transportation options for many types of cargo. In addition, the cost of transportation accounts for a significant part of the cost of a number of goods. The state’s influence is very high due to its operational and shareholder control, provision of state support in the form of subsidies, and partial financing of its investment program related to the government’s strategic projects, including through the National Welfare Fund and tax benefits.

The Company’s standalone creditworthiness assessment (SCA) takes into account its very strong market position, strong business profile, very strong geographic diversification assessment, and high quality corporate governance. The financial risk profile assessment was a constraining factor in the determination of the SCA, taking into account the medium leverage, high capital expenditures relative to revenues (which is  due to its major investment program), and strong liquidity position. At the same time, ACRA notes changes to a number of financial indicators in 2024 (including those that influence the assessments of liquidity and leverage) due to higher interest expenditures and increased total debt amid high capital expenditures.

FFO before net interest payments was RUB 910 bln in 2024. Taking into account the latest changes to tariffs, the Agency expects this indicator to grow to RUB 1 tln in 2025 provided that loading volumes on Russian Railways’ networks remain at last year’s level (about 1.2 bln tons). The Company’s total debt was RUB 3.5 tln as of December 31, 2024 (including perpetual bonds and other adjustments of the Agency). By the end of 2024, RZD’s debt had increased by 39%, which was primarily due to the need to finance the large-scale investment program, the volume of which last year amounted to RUB 1.4 tln. Taking into account the peak of capital expenditures in 2024 (the average annual volume of capital expenditures is not expected to exceed RUB 0.9 tln in 2025–2027), ACRA predicts that the Company’s total debt will remain within RUB 3.0–3.6 tln in the next three years. The ratio of total debt to FFO before net interest payments will be around 3.5–3.7x in 2025, and then will gradually decline in 2026–2027. The debt service indicator (ratio of FFO before net interest payments to interest payments) was 2.7x in 2024. According to ACRA’s estimates, this metric will fall below 2.5x in 2025 amid significant volumes of debt refinancing in the conditions of high interest rates. The Agency expects a gradual improvement in debt service indicators after 2025, given the predicted decline in the Company’s leverage and a possible decrease of interest rates.

The Company continues to generate negative FCF because of its large-scale investment program, which includes major projects to construct and modernize railway infrastructure (including the development of railways for the Eastern Polygon). ACRA assumes that RZD’s FCF will remain negative until at least 2026. The weighted ratio of capital expenditures to revenues for 2022 to 2027 is 30%. The Agency notes that the Company possesses certain flexibility in implementing its capital development program, taking into account state funding for projects initiated by the state.

The high assessment of RZD’s liquidity position is based on substantial available credit lines (of around RUB 2.4 tln as of the start of the year), as well as a considerable volume of funds in the Company’s accounts (RUB 279 bln as of December 31, 2024). At the same time, ACRA notes that the presence of significant short-term debt (around RUB 1.5 tln) on the back of negative FCF has a negative impact on liquidity indicators, however, undrawn credit lines provide the possibility to refinance short-term debt liabilities.

KEY ASSUMPTIONS

• Total amount of annual state support, including subsidies and contributions to authorized capital, at not less than RUB 50 bln;

• Implementation of the capital investment program will not lead to a breach of the restrictions imposed by the directive of the Government of the Russian Federation (net debt to EBITDA ratio of no higher than 3.5x) in the long term;

• Balanced dividend policy that takes into account market conditions, high capital expenditures, and the need to maintain moderate leverage;

• No significant annual dividend payments over the forecast period from 2025 to 2027.

POTENTIAL OUTLOOK OR RATING CHANGE FACTORS

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

A negative rating action may be prompted by:

• Loss of shareholder control by the state or a substantial decrease of the volume of financial support;

• Significant decline of RZD’s systemic importance to the Russian economy due to the restructuring of the Company.

RATING COMPONENTS

SCA: a+.

Support: on par with the Russian Federation.

ISSUE RATINGS

Key issue properties of senior unsecured debt

Rationale. The issues listed below represent senior unsecured debt of the Company. Due to the absence of either structural or contractual subordination of the issues, ACRA ranks them as equal to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. In accordance with ACRA’s methodology, and taking into account the high creditworthiness and moderate leverage of the issuer, as well as the absence of secured debt obligations, the Agency rates the bond issues AAA(RU), on par with the credit rating of RZD.

1)      Uncertificated non-convertible exchange-traded interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, 001P-23R series (RU000A103EN3), maturity date: July 10, 2028, issue volume: RUB 15 bln — AAA(RU).

2)      Uncertificated non-convertible exchange-traded interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, 001P-22R series (RU000A102R40), maturity date: July 5, 2027, issue volume: RUB 10 bln — AAA(RU).

3)      Uncertificated non-convertible exchange-traded interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, 001P-21R series (RU000A102QP4), maturity date: June 11, 2027, issue volume: RUB 20 bln — AAA(RU).

4)      Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 32 (RU000A0JSGV0), maturity date: June 25, 2032, issue volume: RUB 10 bln — АAА(RU).

5)      Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 28 (RU000A0JTU85), maturity date: March 21, 2028, issue volume: RUB 20 bln — АAА(RU).

6)      Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 30 (RU000A0JUAH8), maturity date: November 7, 2028, issue volume: RUB 15 bln — АAА(RU).

7)      Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 33 (RU000A0JVB19), maturity date: February 28, 2040, issue volume: RUB 15 bln — АAА(RU).

8)      Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 34 (RU000A0JVB27), maturity date: February 28, 2040, issue volume: RUB 15 bln — АAА(RU).

9)      Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 35 (RU000A0JVKH5), maturity date: May 30, 2040, issue volume: RUB 15 bln — АAА(RU).

10)   Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 36 (RU000A0JVY04), maturity date: October 15, 2040, issue volume: RUB 15.2 bln — АAА(RU).

11)   Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 41 (RU000A0JX1S1), maturity date: November 27, 2031, issue volume: RUB 15 bln — АAА(RU).

12)   Certificated interest-bearing non-convertible bond issued by JSCo “RZD”, series 42 (RU000A0JWLU4), maturity date: May 22, 2046, issue volume: RUB 15 bln — АAА(RU).

13)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series BO-02 (RU000A0JVW71), maturity date: October 16, 2025, issue volume: RUB 15 bln — АAА(RU).

14)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series BO-07 (RU000A0JWC82), maturity date: March 25, 2026, issue volume: RUB 20 bln — АAА(RU).

15)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series BO-05 (RU000A0JWD57), maturity date: April 3, 2026, issue volume: RUB 10 bln — АAА(RU).

16)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series BO-17 (RU000A0JWHU2), maturity date: April 26, 2041, issue volume: RUB 15 bln — АAА(RU).

17)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series BO-11 (RU000A0JXJK7), maturity date: February 4, 2032, issue volume: RUB 15 bln — АAА(RU).

18)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001Р-01R (RU000A0JXN05), maturity date: May 18, 2032, issue volume: RUB 15 bln — АAА(RU).

19)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-02R (RU000A0JXQ44), maturity date: April 2, 2037, issue volume: RUB 15 bln — АAА(RU).

20)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-03R (RU000A0JXR84), maturity date: April 23, 2037, issue volume: RUB 15 bln — АAА(RU).

21)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-04R (RU000A0JXZB2), maturity date: July 29, 2032, issue volume: RUB 15 bln — АAА(RU).

22)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-09R (RU000A0ZZRY2), maturity date: October 14, 2033, issue volume: RUB 10 bln — АAА(RU).

23)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-08R (RU000A0ZZGT5), maturity date: August 3, 2028, issue volume: RUB 10 bln — АAА(RU).

24)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-07R (RU000A0ZZ9R4), maturity date: May 26, 2033, issue volume: RUB 10 bln — АAА(RU).

25)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-06R (RU000A0ZZ4P9), maturity date: April 4, 2033, issue volume: RUB 15 bln — АAА(RU).

26)   Certificated exchange-traded interest-bearing non-convertible bond issued by JSCo “RZD”, series 001P-05R (RU000A0ZYU05), maturity date: February 1, 2033, issue volume: RUB 20 bln — АAА(RU).

27)   Certificated exchange-traded interest-bearing non-convertible bond subject to mandatory centralized custody issued by JSCo “RZD”, series 001P-13R (RU000A1007Z2), maturity date: March 19, 2029, issue volume: RUB 20 bln — АAА(RU).

28)   Certificated exchange-traded interest-bearing non-convertible bond subject to mandatory centralized custody issued by JSCo “RZD”, series 001P-14R (RU000A1008D7), maturity date: May 4, 2029, issue volume: RUB 11 bln — АAА(RU).

29)   Certificated exchange-traded interest-bearing non-convertible bond subject to mandatory centralized custody issued by JSCo “RZD”, series 001P-15R (RU000A1009L8), maturity date: April 7, 2027, issue volume: RUB 15 bln — АAА(RU).

30)   Certificated exchange-traded interest-bearing non-convertible bond subject to mandatory centralized custody issued by JSCo “RZD”, series 001P-16R (RU000A100HY9), maturity date: June 25, 2026, issue volume: RUB 30 bln — АAА(RU).

31)   Certificated exchange-traded interest-bearing bond issued by JSCo “RZD”, series 001P-17R (RU000A1010M4), maturity date: November 3, 2025, issue volume: RUB 15 bln — АAА(RU).

32)   Certificated exchange-traded interest-bearing bond issued by JSCo “RZD”, series 001P-18R (RU000A101H84), maturity date: February 20, 2030, issue volume: RUB 15 bln — АAА(RU).

33)   Uncertificated exchange-traded interest-bearing non-convertible bond subject to centralized custody issued by JSCo “RZD”, series 001P-19R (RU000A101LS1), maturity date: April 15, 2027, issue volume: RUB 10 bln — АAА(RU).

34)   Uncertificated interest-bearing non-convertible bond subject to centralized custody issued by JSCo “RZD”, series 001P-20R (RU000A101M04), maturity date: March 15, 2027, issue volume: RUB 15 bln — АAА(RU).

35)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-24R (RU000A104SX0), maturity date: April 30, 2027, issue volume: RUB 10 bln — АAА(RU).

36)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-25R (RU000A104SY8), maturity date: April 30, 2027, issue volume: RUB 15 bln — АAА(RU).

37)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-26R (RU000A106K43), maturity date: July 19, 2028, issue volume: RUB 30 bln — АAА(RU).

38)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-27R (RU000A106VV3), maturity date: September 9, 2027, issue volume: RUB 30 bln — АAА(RU).

39)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-28R (RU000A106ZL5), maturity date: September 20, 2030, issue volume: RUB 45 bln — АAА(RU).

40)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-29R (RU000A107936), maturity date: November 15, 2030, issue volume: RUB 45 bln — АAА(RU).

41)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-30R (RU000A107PU5), maturity date: February 3, 2031, issue volume: RUB 30 bln — АAА(RU).

42)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-31R (RU000A108124), maturity date: March 5, 2032, issue volume: RUB 20 bln — АAА(RU).

43)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-32R (RU000A108Z85), maturity date: August 18, 2029, issue volume: RUB 45 bln — АAА(RU).

44)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-33R (RU000A109PF2), maturity date: October 29, 2028, issue volume: RUB 25 bln — АAА(RU).

45)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-34R (RU000A10ASY0), maturity date: July 3, 2028, issue volume: RUB 20 bln — АAА(RU).

46)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-35R (RU000A10ASZ7), maturity date: August 7, 2028, issue volume: RUB 17 bln — АAА(RU).

47)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-36R (RU000A10AUE8), maturity date: November 22, 2028, issue volume: RUB 20 bln — АAА(RU).

48)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-37R (RU000A10AZ45), maturity date: August 24, 2028, issue volume: RUB 28 bln — АAА(RU).

49)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-38R (RU000A10AZ60), maturity date: March 2, 2030, issue volume: RUB 30 bln — АAА(RU).

50)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-39R (RU000A10B0T2), maturity date: January 28, 2035, issue volume: RUB 20 bln — АAА(RU).

51)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-40R (RU000A10B115), maturity date: January 14, 2035, issue volume: RUB 30 bln — АAА(RU).

52)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-41R (RU000A10B495), maturity date: March 1, 2040, issue volume: RUB 30 bln — АAА(RU).

53)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-42R (RU000A10BGF2), maturity date: April 5, 2040, issue volume: RUB 30 bln — АAА(RU).

54)   Uncertificated non-convertible interest-bearing bond subject to centralized title registration issued by JSCo “RZD”, series 001P-43R (RU000A10BTA6), maturity date: April 27, 2035, issue volume: RUB 40 bln — АAА(RU).

Key issue properties of unsecured perpetual bonds (with the option of redemption at the issuer’s discretion)

Rationale. The terms of the issues listed below provide that the Company may decide not to pay any coupon, without any liability for such non-payment. Taking into account the subordination of the rated issues in relation to the senior unsecured debt of the issuer, which has an ACRA rating of AAA(RU), as well as the factor of full compensation to investors for lost income (in accordance with Resolution of the Government of the Russian Federation No. 1380 dated August 9, 2020) if RZD decides not to pay the coupon, the issues below have been assigned a rating one notch below the issuer’s rating — AA+(RU).

55)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-08 (RU000A102S72), issue volume: RUB 24 bln — АА+(RU).

56)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-07 (RU000A102GA7), issue volume: RUB 10 bln — АА+(RU).

57)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-06 (RU000A102FE1), issue volume: RUB 40 bln — АА+(RU).

58)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-05 (RU000A102E37), issue volume: RUB 33 bln — АА+(RU).

59)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-01 (RU000A101TT2), issue volume: RUB 30 bln — АА+(RU).

60)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-02 (RU000A101Y18), issue volume: RUB 20 bln — АА+(RU).

61)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-03 (RU000A102564), issue volume: RUB 100 bln — АА+(RU).

62)   Perpetual callable uncertificated non-convertible interest-bearing bond issued by JSCo “RZD” subject to centralized title registration, series 001B-04 (RU000A1028U9), issue volume: RUB 80 bln — АА+(RU).

REGULATORY DISCLOSURE

The credit ratings have been assigned to JSCo “RZD” and the bond issues of JSCo “RZD” under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Non-Financial Corporations under the National Scale for the Russian Federation, Methodology for Assigning Credit Ratings with External Support, and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit ratings to the bond issues.

The credit rating of JSCo “RZD” and the credit ratings of the bond issues of JSCo “RZD” (ISIN RU000A0JSGV0, ISIN RU000A0JTU85, ISIN RU000A0JUAH8, ISIN RU000A0JVB19, ISIN RU000A0JVB27, ISIN RU000A0JVKH5, ISIN RU000A0JVW71, ISIN RU000A0JVY04, ISIN RU000A0JWC82, ISIN RU000A0JWD57, ISIN RU000A0JWHU2, ISIN RU000A0JWLU4, ISIN RU000A0JX1S1, ISIN RU000A0JXJK7, ISIN RU000A0JXN05, ISIN RU000A0JXQ44, ISIN RU000A0JXR84, ISIN RU000A0JXZB2) were published by ACRA for the first time on November 16, 2017. The credit ratings of the bond issues (ISIN RU000A0ZZRY2, ISIN RU000A0ZZGT5, ISIN RU000A0ZZ9R4, ISIN RU000A0ZZ4P9, ISIN RU000A0ZYU05, ISIN RU000A1007Z2, ISIN RU000A1008D7, ISIN RU000A1009L8, ISIN RU000A100HY9, ISIN RU000A1010M4, ISIN RU000A101H84, ISIN RU000A101LS1, ISIN RU000A101M04, ISIN RU000A101TT2, ISIN RU000A101Y18, ISIN RU000A102564, ISIN RU000A1028U9, ISIN RU000A102E37, ISIN RU000A102FE1, ISIN RU000A102GA7, ISIN RU000A102QP4, ISIN RU000A102R40, ISIN RU000A102S72, ISIN RU000A103EN3, ISIN RU000A104SX0, ISIN RU000A104SY8, ISIN RU000A106K43, ISIN RU000A106VV3, ISIN RU000A106ZL5, ISIN RU000A107936, ISIN RU000A107PU5, ISIN RU000A108124, ISIN RU000A108Z85, ISIN RU000A109PF2, ISIN RU000A10ASY0, ISIN RU000A10ASZ7, ISIN RU000A10AUE8, ISIN RU000A10AZ45, ISIN RU000A10AZ60, ISIN RU000A10B0T2, ISIN RU000A10B115, ISIN RU000A10B495, ISIN RU000A10BGF2, ISIN RU000A10BTA6) were published by ACRA for the first time on November 2, 2018, August 16, 2018, June 14, 2018, April 23, 2018, February 19, 2018, April 1, 2019, April 4, 2019, April 17, 2019, July 4, 2019, November 11, 2019, March 4, 2020, April 23, 2020, April 24, 2020, June 26, 2020, July 31, 2020, September 30, 2020, October 22, 2020, November 30, 2020, December 3, 2020, December 10, 2020, February 8, 2021, February 12, 2021, February 25, 2021, July 19, 2021, May 6, 2022, May 6, 2022, July 17, 2023, September 13, 2023, October 5, 2023, November 24, 2023, January 31, 2024, March 15, 2024, July 15, 2024, October 2, 2024, February 4, 2025, February 4, 2025, February 11, 2025, February 26, 2025, February 26, 2025, March 6, 2025, March 7, 2025, March 20, 2025, April 24, 2025, and June 18, 2025, respectively.

The credit rating of JSCo “RZD” and its outlook and the credit ratings of the bond issues of JSCo “RZD” are expected to be revised within one year following the publication date of this press release.

The credit ratings were assigned based on data provided by JSCo “RZD”, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited and JSCo “RZD” participated in their assignment.

In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.