Fitch upgrades Sovcomflot to 'BB+'; Outlook Stable
Fitch Ratings has upgraded Russia-based PAO Sovcomflot's (SCF) Long-Term Issuer Default Rating (IDR) to 'BB+' with Stable Outlook from 'BB'/'Positive'. Fitch has also upgraded SCF Capital Designated Activity Company's senior unsecured notes, which are guaranteed by SCF, to 'BB+'
According to the statement, the upgrade reflects SCF's improved business profile due to an expansion in industrial business.
The upgrade is also supported by our expectation of funds from operations (FFO) adjusted net leverage moderation to about 5x in 2019 and to about 4.6x on average over 2020-2022 down from a peak of slightly above 7x in 2017.
The rating also incorporates SCF's large scale of operations, fairly young and specialised fleet, diversified customer base and exposure to market risks through conventional business.
“Leverage Moderation Expected: In 2018, SCF's Fitch-calculated FFO adjusted net leverage decreased to 5.7x from a capex- and low rates- driven peak of 7.4x at end-2017; we expect it to moderate further to about 5x in 2019 and to about 4.6x on average over 2020-2022 on stable cash flow from the industrial segment and lower-than-historical level of capex. We expect SCF will generate healthy cash flow from operations in 2019-2022, but that its FCF will be negative in 2019, and neutral to slightly positive in 2020 on an increase in EBITDA following the introduction of seven new vessels over 2019-2020”, says the statement.
Sovcomflot (SCF Group) is one of the world's leading energy shipping companies, specialising in the transportation of crude oil, petroleum products, and liquefied gas, as well as the servicing of offshore oil and gas exploration and production. The company’s fleet includes 146 vessels with a total deadweight of over 12.7 million tonnes. Over 80 vessels have an ice class.
