Outlook On Russia's Rosinter Restaurants Holding Revised To Stable From Negative On Improved Liquidity; 'B-' Affirmed
December 21, 2012 Standard & Poor's
• Rosinter Restaurants Holding's (Rosinter's) liquidity has improved after the company obtained long-term credit lines from its major banks to refinance its 2013 maturities.
• We are revising our outlook on Rosinter to stable from negative and affirming the 'B-' long-term rating.
• The stable outlook reflects our view that available long-term committed credit lines and Rosinter's improved liquidity position offset the company's still weak operating performance and will support recovery of its restaurant business next year.
MOSCOW (Standard & Poor's) Dec. 21, 2012--Standard & Poor's Ratings Services said today it revised to stable from negative its outlook on Rosinter Restaurants Holding OJSC (Rosinter), Russia's largest casual-dining restaurant chain. We affirmed the long-term corporate credit rating at 'B-'.
The outlook revision reflects Rosinter's improved liquidity position after the company obtained long-term credit lines from its major banks to refinance its 2013 maturities. As a result, we have revised our liquidity assessment on Rosinter from "weak" to "less than adequate". We note an improvement in the area of covenant compliance on Rosinter's current bank loans, as the company has agreed with Sberbank and ZAO UniCredit Bank to amend some target ratios and change the way these ratios are calculated, particularly EBITDA calculation.
In our base-case assessment, we assume that Rosinter will report low-single-digit revenue growth in 2012 and 2013. Although the management is taking steps to improve its operating performance, significant recovery is not expected earlier than in 2014. We expect that Rosinter's reported EBITDA margin before impairments and noncash write-offs will remain slightly above 8% in 2012-2013, benefiting from the company's cost-cutting initiatives and sustainable price increases.
Accordingly, we assume in our base-case assessment that Rosinter will generate at best marginally positive free operating cash flow in 2013 due to significant capital expenditure plans to revitalize the company's brands. Therefore, we don't expect Rosinter's debt burden to decrease significantly within the next year. We anticipate a debt-to-EBITDA ratio adjusted for operating leases in a corridor of 4.0x-4.5x. More sizable improvements in Rosinter's cash flow generation and credit metrics, which we don't expect will materialize before 2014, hinge on the new management's ability to successfully execute the company’s revitalization strategy. We view Rosinter's management and governance as "fair" as per our criteria.
We believe Rosinter's improved liquidity position will enable the company to turn its operations around without incurring refinancing risk over the next 12 months. We factor in management's more prudent financial policy stance, as reflected in its strategy that future investments, as a key driver of future liquidity needs, will not exceed the company's available sources of liquidity.
Company — Rosinter Restaurants Holding
Full namePJSC Rosinter Restaurants Holding