Fitch Affirms Russian Highways State Company AVTODOR at 'BBB-'; Outlook Stable


22 Dec 2016 5:19 AM


Fitch Ratings-Moscow/London-22 December 2016: Fitch Ratings has affirmed Russian Highways State Company AVTODOR's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'BBB-', National Long-Term rating at 'AAA(rus)' and Short-Term Foreign Currency IDR at 'F3'. The Outlooks on the Long-Term ratings are Stable.

Fitch has also affirmed AVTODOR's senior debt ratings at 'BBB-'/'AAA(rus)'.

AVTODOR's ratings are equalised with the Russia Federation (BBB-/Stable), reflecting its strategic importance as a government financial vehicle in the development of the national toll-road network. The ratings also factor in AVTODOR's special legal status as a state company solely owned by Russia and its strong operational and financial links with the state. Fitch views AVTODOR as a sovereign credit-linked entity under its "Rating of Public-Sector Entities Criteria".

KEY RATING DRIVERS
Strategic Importance: Stronger
AVTODOR was established in 2009 as a government agent to stimulate private investments in national-scale toll-road projects via promotion of public-private partnerships (PPPs). After enactment of legal changes in 2014-2015 AVTODOR could also participate in regional road development projects; those are normally of a smaller scale with minimal investments starting from RUB1bn (USD16m).

AVTODOR targets stronger development of global transport corridors. It leads creation of a network of toll-roads, aimed at modernisation of national highways of prime strategic importance. Major projects under the company's management are linked M1 Belarus, M4 Don, M11 St. Petersburg - Moscow and CKAD Central Beltway Road.

Legal Status: Stronger
Fitch views AVTODOR's special legal status as a highly supportive factor for the ratings. AVTODOR enjoys the special legal status of a state company, while its non-profit mission is enabled via state funding and allocation of assets.

It was established in 2009 by a special law as the operating arm of the Russian state for the design and construction of the national highway network, the rebuilding of existing roads and the development of highway infrastructure and service. The group features nine subsidiaries and seven regional offices.

Control: Stronger
As a state-owned and controlled entity, AVTODOR reports to the Federal Ministry of Transportation. Its supervisory board is composed of top-ranking government officials and business representatives. The board oversees and approves the company's strategy, its business plan and borrowings, subject to the state's final approval.

Integration: Stronger
AVTODOR is financially integrated with the state as the company has a separate item in the federal budget. The state's funding of the company is composed of subsidies and bonds issued in favour of development institutions. AVTODOR's 2015 long-term domestic bonds (RUB21.7bn) were funded by Russia's National Welfare Fund.

According to the borrowing plan, AVTODOR could issue bonds up to RUB241.7bn by end-2020, out of which RUB31.7bn were issued as of 1 December 2016. Fitch expects that a significant portion of this debt will either have explicit government guarantees on the principal or be issued to state development institutions.

AVODOR's liquidity position had improved at end-3Q16 to RUB17.9bn held on federal treasury accounts and deposited in state-owned banks (2015: RUB13bn). AVTODOR deposits its cash mainly in state-owned banks - Sberbank of Russia (BBB-/Stable) and Gazprombank (BB+/Stable). Cash holdings provide the company with adequate operating flexibility and mitigate most refinancing risk.

Toll Roads on Schedule
AVTODOR currently has 13 investment projects in its portfolio, four of which are operational. The investments are valued at RUB675bn with 23% to be covered by private investors. The company's portfolio of commissioned toll sections should significantly increase by end-2018, which is the deadline for the commissioning of the inaugural sections of CKAD Central Beltway Road, M11 Highway and some sections of M3 Ukraine.

RATING SENSITIVITIES
AVTODOR's ratings are equalised with those of Russian Federation. Any change in Russia's ratings will be mirrored on the ratings of AVTODOR.

Negative rating action on the Russian Federation or weakening of the company's links with the state as reflected by a material reduction in annual subsidies or significant growth of market-originated unguaranteed debt would lead to a downgrade.

Contact:
Primary Analyst
Konstantin Anglichanov
Director
+7 495 956 9994
Fitch Ratings CIS Ltd
26 Valovaya Street
Moscow, 125047

Secondary Analyst
Alexey Kobylyanskiy
Analyst
+7 495 956 9980

Committee Chairperson
Guido Bach
Senior Director
+49 69 76 807 6111

Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.

Additional information is available on www.fitchratings.com

Applicable Criteria
International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016)
National Scale Ratings Criteria (pub. 30 Oct 2013)
Rating of Public-Sector Entities – Outside the United States (pub. 22 Feb 2016)

Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy


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