Press Releases / 15.10.2013
Press Release as of 15.10.2013
AK&M Rating Agency assigned the A rating on the national scale with stable outlook to the bonded loan of documentary bearer inconvertible interest-bearing bonds released by CJSC Volga–Sport.
The A Rating indicates that the bonded loan of the 4-02-20468-P series is included into the category of high credit quality. The risk of the undue execution of liabilities is rather low and probability of the restructuring of the debt or of its portion is close to zero.
The bonded loan of the 4-02-20468-P series (ISIN code: RU000A0JT593) was released by CJSC Volga–Sport in the volume of 1.9bn rub. and allocated Oct. 31, 2013. The maturity period is equal to 4 139 days (11.3 years) with full coverage set for Feb. 29, 2024. This loan is aimed to raise financial resources on the stock market to provide the funding and realization of the investment project on the building and maintenance of the sports complex in Ulyanovsk (roofed sports complex with manufactured ice for 5 000 seats).
The project is realized on the basis of the state-private partnership within the Concession agreement №94-DP of 18.06.2012 stipulating CJSC Volga–Sport as a concessioner and Ulyanovsk reg. administration is a concedent. The building, equipping and launching into operation of the sports complex is assumed to be completed in IQ 2014. The deadline for the usage of the sports complex by the concessioner is set for Apr. 2014 - Mar. 2024.
The project is appraised to demand 1.9bn rub. with VAT. The debt ceiling on the bonded loan was achieved by 2012 end.
The most important factors backing up the rating of the № 4-02-20468-Р series of the bonded loan released by CJSC Volga–Sport include the available security at the regional level; flexible schedule of the bonded debt coverage; high reliability of the main project initiator and rather high creditability of the loan issuer; low operating risks of the maintenance and expected funding of the servicing and coverage of liabilities due to the positive monetary flows.
The most important factor stipulating the high rating of the bonded loan is the actual security of the project provided by the Ulyanovskaya reg. government. The terms of the concession agreement between Ulanovskaya reg. and CJSC Volga–Sport stipulates probability of the concession agreement cancellation, in particular, in case of the concessionaire’s failure to reach annual results foreseen in the financial model as an integral part of the agreement. In such case, all issuer’s expenses on the project will be covered even in case of the unexpected negative changes in the project and its realization including the considerable worsening of financial indicators. Besides, the generation of the revenues on the maintenance of the sports complex is assumed to be provided due to its rent by the regional government through the authorized institutions which is considered as extra support of the project at the regional level and protection of investors.
The flexible scheme of the bonded loan coverage is of key importance. It should be noted that the loan must be covered only by the moment of the expiration date, a borrower keeping the right of the preterm coverage. Under such conditions CJSC Volga Sport has quite real opportunity to execute the required loan liabilities.
The rating of the bonded loan is based upon the high reliability of the project’s originator. CJSC Volga Sport performs under control of CJSC Leader as of the largest Russian asset management company through they are not affiliated companies. The Leader’s holders include Gas Industry Insurance Society, NPF Gazfond, Gazprombank. Besides, the analysis revealed rather high level of creditability of the loan’s issuer proved by the current positive financial situation at Volga Sport and good financial results achieved due to the maintenance of the operating sports objects in Nizhegorodskaya reg. By IH 2013 end the assets of Volga Sport increased almost 2.5 fold to reach 3.9bn rub. against the prior year period; own capital rallied up 4 fold to 26.5mln rub.; the net profit boosted 3.2 fold to 4.7mln rub. in IQ 2013 and gained 9.7mln rub. on the 6.6 fold rise in IH 2013.
The rating of the loan was affected, mainly, by low risks of the sports complex maintenance stipulated in the terms of the Concession agreement, other contracts and risk management policies realized within the project. After the complex being built and launched into operation the basic risks will be shifted to the leasers.
The project analysis illustrates that all expenditures on the servicing and coverage of obligations are backed by sufficient positive money flows. The tentative debt coverage patterns (money flow accessible for the debt servicing and included into the list of appropriate expenses on the servicing and coverage of the principal) within the bonds payment period are always higher the unit. Thus, the financial model of the project stipulates the tentative money flow sufficient for the coverage of the bonds.
The 4-02-20468-P series rating constraints involve the dependence of the project revenues on the Ulyanovskaya reg. budget and delay in the complex’s launching date till IQ 2013.
The dependence of the project’s financial stability on the regional budget is stipulated by the available liabilities of the Ulyanovskaya reg. government on the coverage of the sports complex rent and reimbursement of probable losses of a concedent.
The rating is restrained as well by the risks of the sports complex building, in particular, the delay in its launching till IQ 2014. In spite of rather high level of the insurance coverage of the building risks within the project it should be noted that the delayed period of the building always yields rise in the prices which could negatively affect the financial situation at the issuer.
CJSC Volga Sport is a society initially set up in line with the legislation in force for the realization of the social infrastructure project on the building and maintenance of the sports and fitness centers in Lukoyanovsky, Pavlovsky and Krasnobakovsky districts of Nizhegorodskaya reg. The building of the sports complex in Ulyanovsk is the next large project realized by the above Company, which decided to allocate the rated bonded loan of the 4-02-20468-Р series for this purpose.
To mobilize the funding of the Nizhegorodskie projects CJSC Volga Sport placed the bonded loan of the 4-01-20468-P series. By now these sports and fitness centers have been built and launched in operation. AK&M Rating Agency assigned the A rating with stable outlook for the loan of the 4-01-20468-P series issued by Volga Sport in 2012.
Thus, CJSC Volga Sport is an issuer of two bonded loans being under the current circulation.
The assets of Volga Sport reached about 3.9bn rub. IH 2013 end; revenues being fixed to gain 131.8mln rub.; net profit – 9.7mln rub.
The name in English: Volga–Sport, CJSC.
This press release is based upon the report on the assignment of the credit rating to the bonded loan of the 4-02-20468-P series released by CJSC Volga-Sport.
The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company’s credit standing and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities.
AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
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