International Steelmaker Evraz Group S.A. Proposed Eurobond Assigned 'B+' Issue Rating (Recovery Rating: '4')
April 11, 2012 Standard & Poor's
• We are assigning an issue rating of 'B+' and a recovery rating of '4' to the proposed Eurobond to be issued by Russia-headquartered international steelmaker Evraz Group S.A.
• We believe the group would reorganize in the event of a payment default.
• In our view, recovery prospects are supported by the group's sizeable asset base and offset by its high level of prior-ranking debt facilities, the unsecured nature of the rated debt instruments, and the unfavorable Russian insolvency regime.
• Based on our stressed enterprise valuation of $5.0 billion for Evraz Group, after deducting priority claims, we assess recovery prospects in the 30%-50% range, leading to a recovery rating of '4'.
PARIS (Standard & Poor's) April 11, 2012--Standard & Poor's Ratings Services said today it assigned an issue rating of 'B+' to a proposed Eurobond to be issued by Russia-headquartered international steel manufacturer Evraz Group S.A. This is in line with the 'B+' long-term corporate credit rating on Evraz and the issue rating on its other existing rated debt instruments.
We assigned a recovery rating of '4' to the proposed bond, indicating our expectation of average (30%-50%) recovery for bondholders in the event of a payment default. This is also in line with Evraz's existing rated debt.
Recovery and issue ratings on the proposed bond are conditional on successful issuance with no major changes to the proposed terms and conditions.
The 'B+' long-term corporate B+ long-term issuer credit rating on Evraz remains unchanged.
All the notes at Evraz Group S.A. level are unsecured and unguaranteed, with the exception of the 2015 bond that has a guarantee from a subholding company, Mastercroft Ltd. The proceeds are to be used to refinance existing debt.
We believe the group would reorganize in the event of a payment default, and have valued the group as a going concern based on multiple market valuation. We have simulated a default in 2015, caused by sustained weak steel prices, volume declines, restructuring, and higher costs.
Based on our stressed enterprise valuation of $5.0 billion, and after deducting priority claims, we assess recovery prospects in the 30%-50% range, leading to our recovery rating of '4'. Recovery prospects are limited by the high level of prior-ranking debt facilities. We note that an increase in such debt could weaken the position of unsecured bondholders and potentially trigger a one-notch lowering of the rating if recovery prospects fell below 30%.
Company — Evraz Palini e Bertoli S.r.l.