Fitch Maintains Sistema-Hals on RWN on VTB Share Offer
December 30, 2009 Fitch Ratings
Fitch Ratings-London-29 December 2009: Fitch Ratings is maintaining JSC Sistema Hals’s (SH) Foreign Currency Long-term (FC LT) Issuer Default Rating (IDR) of ‘CCC’ and National Long-term rating of ‘B-‘(rus) on Rating Watch Negative (RWN). The agency has simultaneously affirmed SH’s Short-term foreign currency IDR at ‘C’.
This action follows the announcement today that Bank VTB JSC (VTB, ‘BBB’/Negative Outlook) is tendering to purchase up to 4.55 million shares in SH (around 40.6% of the total shares in issue) at RUB736.69 per share. On 3 December 2009 SH had already announced that VTB had increased its shareholding in SH to 51.1% from 19.7%.
The RWN has been maintained as the plans for dominant ownership have not been supported by any positive messages for SH creditors. The ratings could be downgraded if SH experiences a payment default and tangible financial support is not forthcoming from main shareholders within the applicable grace period. SH’s ratings could be downgraded to ‘RD’ (Restricted Default) if the company initiates a debt restructuring that qualifies as a coercive debt exchange (CDE), or repays creditors at less than par. Alternatively this transaction, if successfully completed, may lead to VTB providing further support for SH, although no firm indication of this has yet been given. The offer will remain open for 70 days.
The ‘CCC’ LT FC IDR already benefits from a two-notch uplift over SH’s standalone credit profile due to expected support from VTB.
For further information, please see the March 2009 criteria report, entitled ‘Coercive Debt Exchange Criteria’, which is available on the agency’s website, www. fitchratings.com
SH is a Russia-based residential and commercial property development company.
Company — Hals-Development
Full namePJSC Hals-Development
IndustryConstruction and development