Fitch Assigns ISD Finance Plc’s Loan Participation Notes Expected ‘B+’/‘RR4’
July 10, 2007
Fitch Ratings-London/Moscow-9 July 2007: Fitch Ratings has today assigned ISD Finance Plc’s proposed issue of USD350m-500m loan participation notes (“LPNs”) expected senior unsecured ‘B+’ and Recovery ‘RR4’ ratings. The notes will benefit from surety from three group entities, including the parent company Corporation Industrial Union of Donbass (“ISD”). The expected rating is in line with ISD’s Long-term Issuer Default ‘B+’ rating with Stable Outlook, which along with ISD’s Short-term Issuer Default ‘B’ rating is affirmed today. The final rating on the notes is contingent on the receipt of final documentation conforming to information already received and further details regarding the amount and tenor. The final rating is subject to satisfactory legal opinion.
The LPNs will be issued by ISD Finance Plc on a limited recourse basis for the sole purpose of funding loans to the borrowers - ISD, AMK and DMKD (AMK and DMKD are ISD’s main Ukrainian steel production facilities). Each of the borrowers will provide surety in relation to the obligations of the other borrowers on a joint and several basis. The notes are unsecured obligations of the issuer that rank equally with other unsecured obligations and will have the benefit of a trust deed. ISD intends to use the proceeds of the bond issue to retire the group’s USD150m credit-linked notes, repay a new bridge loan of USD200m that was drawn in H107, and to fund capital expenditure needs. ISD Finance Plc is an SPV incorporated in England and Wales.
The loan agreement carries a change of control clause and a cross default provision. The financial covenants include a leverage ceiling of 3x and net worth minimum level of UAH6bn (USD1.2bn). With FY06 total debt/EBITDA ratio of 1.9x, the company has headroom under the above-mentioned covenant.
ISD is the largest steel producer in Ukraine (including international operations) with crude steel production of 9.7 million tonnes in 2006. Its FY06 revenues reached UAH24.5bn (USD4.9bn).
Company — ISD