Russian Railways to issue 10-year Eurobonds.

By bne IntelliNews March 30, 2012
Russia's state-owned railways monopoly Russian Railways (RZD) is going to issue 10-year Eurobonds yielding 5.7% annually, Reuters cites a banking source. It was previously reported that Russian Railways plan to issue at least USD 500mn worth of Eurobonds. This year the company is going to borrow about RUB 100bn, out of which 70% will account for RUB and 30% for foreign currencies. IFRS net profit of RZD declined by 30% y/y to RUB 67bn in H1/11. Profit decline was attributed to finishing the package of anti-crisis measures initiated in 2009 that pushed up operational expenses by 20% to RUB 644bn. In H1/11 revenues increased by 9% y/y to RUB 691bn, mostly due to cargo turnover growth of 8%. Last month Fitch Ratings affirmed the foreign currency long-term Issuers Default Rating (IDR) and priority unsecured rating of RZD at BBB, outlook Stable. RZD's ratings are on the same level as Russian sovereign ratings (BBB/Stable) due to 100% state ownership and strategic role of the company, while reflecting strong ties with the state including yearly tariffs, capital investment and subsidies being approved by the government. At the same time Fitch believes that own business and financial indicators of the company comply with the BBB rating, it being held back, however, by short-term nature of tariff-setting, market risk on commodity cargo (coal, oil and iron ore), low geographic diversification and dependency on state financing in terms of subsidies and capital injections. Agency expects single-digit revenues growth in mid-term perspective, EBITDA of about 20%-25% and negative cash flow due to substantial capital investment program of about RUB 1.3tn in 2012-2014.

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