Daily analyst comments
Uralsvyazinform suffers from credit crisis: S&P puts it on CreditWatch list with negative outlook
18.02.08 10:56
The situation with URSI resulted from an ongoing liquidity crisis which could take a toll on the Russian market. In this situation many RTOs could see softer margins and weaker growth. However, we would only be able to assess the situation objectively at a later time. For the time being, we are not inclined to adjust our financial models. At present the problem is not critical and URSI is to more than likely find financial resources.
The media reported on February 15 that Uralsvyazinform failed to raise a RUB 1.5 bn or USD 61 mn loan in the absence of bids as part of a tender to select a lending institution. Immediately after that international rating agency Standard & Poor’s issued a formal press release saying the company’s long-term rating for liabilities in foreign currency was put on the Credit Watch list with a negative outlook.
A few days before Siberia Telecom reported that Sberbank opened the telecom operator a RUB 1 bn or nearly USD 40 mn credit line for 3 years at 10.2%, see daily dated January 29, 2008. We pointed out that the interest rate turned out to be more than 200 bp higher than the company’s current cost of borrowed resources.
At present we can be confident that the aggravated situation with liquidity on the Russian debt market could take a toll on many RTOs. STC, URSI and Siberia Telecom stand to lose the most, since they have the highest net debt/EBITDA ratios among RTOs.
At present it is difficult to say how deep the financial crisis will be and whether we would see it at all. We do not rule out that we could only see a lack of liquidity at individual companies in Russia. However, most RTOS could see softer net margins as early as in 1H 2008 due to the higher cost of borrowings.
Meanwhile, the fundamental attitude toward individual companies is not likely to be revised so far, since there are prerequisites for growth and stronger financial indicators and a liquidity crunch should not likely produce any tangible impact on forecasts. We reiterate our BUY recommendation on URSI commons and prefs with a target price of USD 0.064 and USD 0.40 per share, respectively.