CIS Credit Monitor: Bank Forum, EVRAZ

Bank Forum (NR/B1/B) to decide on share issue

Bank Forum is planning to hold three EGMs later this year to decide on its planned UAH 1.1bn ($129m) additional share issue. Should the share placement be successfully completed it would help to support liquidity and capitalisation level of the bank. Bank Forum’s 2009 Eurobond due in October is unlikely to be found in the market below par (98/100.25 on Bloomberg) which illustrates investor confidence in the likelihood of full repayment. In August, shareholders agreed to strengthen the bank’s authorised capital by 48.7% through an additional share issue in order to bring its capitalisation in line with the new legislation requirements, although terms of the issue were not approved. The new EGMs are scheduled on 28 October, 18 November and 17 December when it is expected to reach an agreement with shareholders.

Another downgrade for EVRAZ (B+/B1/B+)

The second rating agency in a row has reduced the credit rating for EVRAZ and shared its concerns about the company’s liquidity situation in 2010. After a one-notch reduction from S&P at the end of last week (to B+ from BB-), Fitch in its turn decided to reduce the rating to the same level as S&P (B+) and left it on Negative outlook. We believe that the recent rally in EVRAZ Eurobonds is not justified given the weak liquidity outlook for 2010. We believe that Severstal`s liquidity position will be more comfortable than that of EVRAZ going forward which justifies the premium between EVRAZ and Severstal curves.