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S&P: Russian Property Developer OJSC KD GROUP Rated 'B-' And 'ruBBB-'; Outlook Stable

March 17, 2008 | Cbonds

FRANKFURT (Standard & Poor's) March 17, 2008--Standard & Poor's Ratings
Services said today that it assigned its 'B-' long-term corporate credit
rating and 'ruBBB-' Russia national scale rating to OJSC KD GROUP (KD), a
leading Perm-based Russian property development company. The outlook is

"The ratings on KD are constrained by the company's high exposure to
financial risk, stemming from limited liquidity position, weak cash flow
generation burdened by considerable working-capital requirements, and high
financial leverage," said Standard & Poor's analyst Izabela Listowska.

The ratings are constrained further by the company's ambitious expansion
plans; the industry's cyclical nature, with heightened sensitivity to economic
dynamics and uncertainty associated with Russia's evolving political and
business climate; and the country's lack of administrative transparency and
predictability. Other negative rating factors are the group's dependence on
property development in a single region of Russia, and the property
development industry's risky profile, including high competition and volume
and price cyclicality. Property investors' penchant for speculation, heavy
working-capital needs, and complex corporate structure, combined with
convoluted accounting policies, also limit the ratings.

"The stable outlook reflects Standard & Poor's expectation that KD will
maintain sufficient liquidity to service its debt requirements and fund its
ambitious expansion plans," added Ms. Listowska. Given the company's high
financial leverage and constrained liquidity position, we expect it to
prudently manage its operating costs and growth-oriented spending while
enhancing profitability. Nevertheless, we would consider a negative rating
action if the company faces liquidity disruption, experiences operational
pressures such as significant project delays and/or material cost overruns, or
encounters adverse changes in the evolving regulatory and administrative
environment, which is yet to mature. Conversely, positive ratings action would
be considered if planned rapid expansion delivers material increases in
revenues and earnings and the company starts to generate stronger operating
cash flow on a recurring basis, and if the company is successful in extending
its debt maturity profile.

Company: Kamskaya Dolina

Full company nameOpen stock company «Kamskaya Dolina»
Country of riskRussia
Country of registrationRussia


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