Fitch assigns SOCAR's USD notes 'BBB-' final senior unsecured rating

Fitch assigns SOCAR's USD notes 'BBB-' final senior unsecured rating

Azerbaijan, Baku, March 13 / Trend, A.Akhundov /

Fitch Ratings has assigned State Oil Company of the Azerbaijan Republic's (SOCAR) USD-denominated senior unsecured notes a final foreign currency senior unsecured rating of 'BBB-', the Agency's press release says on Wednesday.

SOCAR issued the notes at the corporate level. Although SOCAR owns 100% of all its main cash generating subsidiaries, the notes do not benefit from a direct guarantee from SOCAR's operating subsidiaries. The bond prospectus includes covenants limiting distributions of net income, disposals of core assets, consolidations, negative pledges and cross default provisions.

Although just over half of the group's debt at 30 June 2012 was at the subsidiaries' level, Fitch does not presently consider senior unsecured creditors at the group level to be structurally subordinated given the low amount of earnings from subsidiaries. For example, the main debtor among subsidiaries was SOCAR Turkey Enerji A.S., which accounted for about 31% of total outstanding debt at 30 June 2012 but had a negative EBIT of minus AZN56m in H112.

Additionally, Fitch does not foresee strong asset recovery prospects for subsidiary debt holders in Azerbaijan and does not anticipate asset recovery at subsidiaries abroad to be large enough to encumber other senior unsecured creditors in a liquidation scenario. Fitch has therefore assigned the notes a senior unsecured rating in line with SOCAR's IDR. Fitch may reassess its approach to the notes' rating if the current composition of operating profit and debt change in a way that prioritises subsidiary debt holders over senior unsecured creditors at the group level.

State Support-Driven IDR

SOCAR's ratings incorporate state support and are aligned with Azerbaijan's ('BBB-'/Stable). Wholly state-owned SOCAR represents the state's interests in the strategically important oil and gas industry and continues to receive equity injections from the state, eg, AZN190m in 2011 and a further AZN200m approved in 2012 but not yet transferred to SOCAR.

Fitch views SOCAR's standalone business and financial profiles as commensurate with the 'BB' rating category. This is mainly driven by the company's adequate credit metrics compared with its Russian and international peers, eg, 2011 operating EBITDA margin of 27% and FFO adjusted leverage of 1.2x.

Fitch views positively the fact that in 2011 SOCAR signed second stage agreements regulating sales of Shah Deniz gas to Turkey and its transit to European markets that the company currently estimates at 2017, which should underpin project development.
The ratings factor in SOCAR's intensive capex programme of AZN5.3bn over 2012-2015, including its obligations under the PSAs. In addition, the group plans to build a STAR refinery in Turkey with 10m tonnes of crude oil refining capacity to be completed in 2017.

Fitch forecasts SOCAR's FFO adjusted leverage to remain below 2x in 2012, but to increase above 2x by 2013. This leverage is still comfortable for the current rating.
SOCAR's ratings could be affected by a sovereign rating action. Evidence of weakening state support would be negative for SOCAR's ratings. An increase in the level of state support, eg., government guarantees for a large portion of the company's debt, coupled with a sovereign upgrade would be positive for its ratings.

An aggressive investment programme and/or acquisitions resulting in a significant and sustained deterioration of credit metrics would be negative for SOCAR's ratings.
SOCAR's cash position of AZN1,006m at 30 June 2012 was sufficient to cover its short-term debt maturities of AZN656m on that date. A large portion of SOCAR's cash including short-term deposits is held at the state-owned International Bank of Azerbaijan ('BB'/Stable).

Fitch notes that SOCAR will need to repay or refinance the equivalent of USD727m in 2013. Thereafter, annual bond maturities do not exceed the equivalent of USD400m until 2017.

74% of SOCAR's debt at 30 June 2012 is denominated in USD including the USD500m bond maturing in 2017.

The official exchange rate is 0.7849 manat to $1 on March 13.

Subscribe to Trend in Google News! Subscribe
Ireland reports first case of Omicron variant
Ireland reports first case of Omicron variant
Four injured after old WWII aircraft bomb explodes in Munich - police
Four injured after old WWII aircraft bomb explodes in Munich - police
EU to exceed current renewable capacity plans for 2030
EU to exceed current renewable capacity plans for 2030
Loading Bars
Ireland reports first case of Omicron variant
Amazon invests in 274 renewable energy projects globally
World Bank backs using $280 mln in frozen aid funds for Afghanistan
Cavushoglu, Blinken discuss situation in Azerbaijan and Armenia
Alec Baldwin on fatal movie set shooting; ‘I didn't pull the trigger’
Afghanistan's GDP likely to drop 20 pct in one year: UN
UAE reports its first case of COVID-19 variant Omicron
Moderna exec says company could have Omicron booster ready in March
UN says international migration rose last year despite Covid-19 impact
Kyrgyz border service reports shots from Tajikistan
Bennett declares ‘Yamam’ Israel’s national counterterrorism force
Transport infrastructure in Karabakh to turn Azerbaijan into logistics hub between Central Asia and Europe – CAERC
Four injured after old WWII aircraft bomb explodes in Munich - police
1st US case of COVID-19 omicron variant identified - Fauci
OPEC can elect new secretary general in January 2022 — source
President Erdogan talks bilateral relations with Crown Prince of UAE
Georgia to receive special PCR tests to detect new Omicron variant of coronavirus
Qatar Airways to launch flights to Uzbekistan from Jan 17, 2022
Iran military clashes with armed men on Afghan border
Armenia found itself in complete military-political isolation even within CSTO - Russian military expert
Net foreign assets in Azerbaijan grow for 10M2021
New geopolitical situation in region opens way for Azerbaijan’s further development - ambassador
Ambassador of Kazakhstan expresses condolences to Azerbaijan due to helicopter crash
Azerbaijan working on reconstruction railway line which is part of Zangazur corridor (PHOTO)
SOCAR’s STAR refinery tests numerous types of crude oil
Azerbaijan considering sending medical workers of Baku clinics to district hospitals
Azerbaijan shares data on number of vaccinated citizens
Azerbaijan confirms 1,795 more COVID-19 cases, 1,967 recoveries
Azerbaijani National Depository Center opens tender to buy new generation security system
Georgia boosts honey exports
Solar PV growth to surpass wind in EU in 2021-2026
Servicemen injured in Azerbaijani helicopter crash talk about incident (PHOTO/VIDEO)
Turkmen company exports paper products to Uzbekistan, Turkey
Iranian companies express readiness to restore factories in Syria - minister
Azerbaijani, Armenian FMs to meet in Sweden
President Ilham Aliyev receives EU Special Representative for South Caucasus (PHOTO/VIDEO)
US Marshall Legacy Institute sends eight more mine detection dogs to Azerbaijan (PHOTO)
Iran’s Bahar Azadi gold coin price rebounds
Azerbaijani agency shares data for mine detection, clearing work in liberated territories
Central Bank of Azerbaijan opens tender to insure fixed assets
Azerbaijan’s 10M2021 oil exports to Spain revealed
Uzbek Statistics Committee shares data on volume of retail trade turnover
Georgian medics advise reconsidering COVID-19 passports issuance
Overview of Uzbekistan's volume of wholesale trade turnover dynamics between 2010-2020
Price indexes of construction, trade sectors at Uzbek stock exchange fall
Georgia, IMF discuss new co-op program
Prices for goods and services in consumer market of Uzbekistan rise
Turkey’s diesel fuel exports to Georgia down
Georgia, NATO discuss further co-op and Black Sea security
Iran bans import of musical instruments due to lack of foreign exchange resources
Turkmen ministry prolongs tender for supply of metal blanks
IRENEX shares data on sales of Tabriz Oil Refining Company
Activities in Iran’s Imam Khomeini port down
Star Refinery satisfies about quarter of Turkey's refined petroleum product needs - CEO
Kazakhstan’s oil and gas company opens tender to supply fittings
Mobile phones rank first in Iran’s total imports - IRICA
Turkmenistan’s education ministry extends tender for setting drip irrigation system
Oil minister tells president, parliament that Iran's oil exports 'significantly grow'
Azerbaijan, Pakistan talk prospects for development of military co-op (PHOTO)
Azerbaijan's SOCAR Polymer exports increase over 10M2021
Iran unveils volume of dates export
Iran’s CBI reveals data on balance of bank loans
EU to exceed current renewable capacity plans for 2030
Azerbaijan reveals oil exports to Italy in 10M2021
Azerbaijan shares data on oil export to Croatia in 10M2021
Baku Metro provides ‘November 8’ station with backup power supply (Exclusive) (PHOTO)
Renewable electricity generation to exceed average annual growth rate of 2015-2020
Expansion of bioenergy for power capacity to slow down
Renewable energy capacity to expand by 2026, says IEA
Azerbaijan talks ongoing work to provide electricity to liberated Lachin district
Special representative of Azerbaijan's President in liberated territories within Karabakh economic region appointed
German Ambassador expresses condolences to Azerbaijan over deadly helicopter crash
Iran, Syria sign four cooperation agreements
Iran to invest in Syrian industrial towns
Austria extends COVID-19 lockdown by 10 days
Branch of Azerbaijan’s Balakhani Operating Company opens tender to buy pipes, pumps
Baku electric company opens tender to buy materials for lamp posts repair
Organization of social zone of Aghdam Industrial Park completes in Azerbaijan – minister
Deputy Prime Ministers of Azerbaijan, Armenia and Russia to meet in Moscow today
Azerbaijan’s Azerishig opens tender for reconstruction of substation in Sumgayit
Kazakhstan increases trade with India over 9M2021
Nar continues to grow IT professionals (PHOTO)
India provides medical, humanitarian aid to over 150 countries to deal with COVID-19: MEA
Georgia receives COVID-19 support grant from German Development Bank
Turkey-Azerbaijan trade turnover grows in October 2021
Kazakhstan reports increase in maritime transport volumes
SOCAR Petroleum to open new petrol station in Azerbaijan’s Gubadli district
SOCAR Georgia Gas increases gas tariffs
Iran reveals COVID-19 data for December 1
Azerbaijan discloses data on oil exports to Israel
Georgian cities receive EU grant for cultural development
Saudi Arabia reports first Omicron case coming from north Africa
Georgian FM expresses condolences for lives lost in crash of military helicopter
PMO records increase in cargo movements in Iranian ports
Turkey’s BOTAS increases gas imports
Hungary launches Stipendium Hungaricum scholarship programm
Russia working out celebration program for 30th anniversary of ties with Azerbaijan - MFA
Burial ceremony of Azerbaijani helicopter crash victims held in second Alley of Martyrs (PHOTO/VIDEO)
Georgian Embassy expresses condolences to Azerbaijan on helicopter crash
Iran to prepare budget bill with highest economic growth estimates - President Raisi
All news