S&P: Troika Dialog 'ruA' Rating Placed On Watch Positive Pending Standard Bank Purchase Of Minority Stake
March 10, 2009 "Standard & Poor's"
PARIS (Standard & Poor's) March 9, 2009--Standard & Poor's Ratings Services said today that it has placed its 'ruA' Russia national scale rating on Troika Dialog Group Ltd., the holding company of Russia's Troika Dialog group (Troika), on CreditWatch with positive implications. At the same time, we affirmed 'B+/B' long- and short-term counterparty credit ratings on Troika. The outlook on the 'B+' long-term global scale rating is negative.
The rating action follows the announcement that Standard Bank of South Africa Ltd. (BBBpi) has agreed to acquire a 33% shareholding in Troika. The acquisition is subject to regulatory approvals. As a result of the transaction, Troika's equity base is to increase by more than $300 million.
"The CreditWatch placement reflects the potential for an improvement in Troika's creditworthiness, due to the expected capital increase and enhanced commercial and financial flexibility resulting from the strategic partnership and ownership of South Africa-based Standard Bank," said Standard & Poor's credit analyst Ekaterina Trofimova. "In Standard & Poor's view, there is a good opportunity for Troika to benefit from future product, operational, managerial, and eventually financial support from Standard Bank."
With total reported assets of $5.5 billion and equity of $558 million on Sept. 30, 2008, Troika is one of Russia's leading brokerage, asset management, and investment banking groups.
Standard & Poor's aims to resolve the CreditWatch placement on completion of the acquisition, including regulatory approval, and after further discussions on Troika's strategy, impact of the absorption of Standard Bank's Russian business, managerial and financial support and cooperation from the South African bank.
If the transaction is successful, we could raise the Russia national scale rating on Troika by one notch. National scale ratings typically provide a finer demarcation of credit risk among local obligors than is possible with Standard & Poor's global scale, as the latter spans the full range of global credit quality and incorporates international comparative risk factors, including direct and indirect sovereign risk considerations. (For more information see "Understanding National Rating Scales," published April 15, 2005," on RatingsDirect.)
The outlook is still negative on global scale ratings, but if we raise the Russia national scale rating we might revise the outlook on the global scale ratings to stable, balancing the negative market pressure with enhanced capitalisation and business benefits of Troika's cooperation with the strong partner. At the completion of the acquisition, we will mostly likely affirm the global scale ratings. We are unlikely to uplift the long-term rating above the stand-alone credit profile of Troika, reflecting a low probability of extraordinary support from Standard Bank.
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