Fitch: Georgian Railway's total debt stabilizes

Fitch: Georgian Railway's total debt stabilizes

BAKU, Azerbaijan, May 16

By Tamilla Mammadova - Trend:

Fitch Ratings has revised JSC Georgian Railway's (GR) Outlook from Stable to Negative while affirming the company's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BB-', Trend reports via the Fitch's report.

"This rating action follows the revision of the Outlook on the sovereign IDR, as GR's ratings remain notched down once from that of Georgia, unchanged since our last review on 22 November 2019," the report said.

Fitch forecasts Georgian gross domestic product (GDP) to contract 4.8 percent in 2020 (a significant downward revision of 9.2 percentage points from previous projection in February 2020).

"While we project the economy to recover 4.3 percent in 2021 we see material downside risks to our forecasts, given the uncertainty around the extent and duration of the coronavirus outbreak. Accordingly GR's main revenue driver - the freight segment - will be negatively affected, which we have factored in our updated rating case," the Fitch said.

GR's score of 22.5 under Fitch's Government-Related Entities (GRE) Criteria is unchanged and stems from a "Strong" assessment of its legal status, ownership and control due to the full state ownership and control. The score also reflects "Moderate" assessments for support track record expectations and socio-political implications of default, along with a "Strong" assessment for financial implications of default.

"We maintain GR's Standalone Credit Profile (SCP) assessment at 'b+', reflecting a "Weaker" assessment for revenue defensibility and financial profile combined with a "Midrange" assessment for operating risk," the report said.

As reported, GR's financial profile remains exposed to commodity market and foreign-exchange risks, along with the geopolitical risks associated with the region. GR is moderately exposed to domestic competition in passenger transportation, while its financial profile is supported by sizable operations in freight transit, where it benefits from its monopolistic position.

Fitch rates GR, based on the combination of its 'b+' SCP and a support score of 22.5, which results in single-notch differential with the IDR of Georgia.

According to the preliminary estimates, GR's total debt at end of 2019 stabilized at 1.56 million lari ($488,513). Its 2019 debt stock is 99 percent Eurobonds, denominated in USD. This results in material exposure to Foreign exchange (FX) risk, as GR's revenue stream only partially offsets FX risk. GR's liquidity position at end of 2019 was stable with 258 million lari ($80.7 million) cash and deposits. It maintains an adequate liquidity buffer, with a cash position of 264.8 million lari ($82.9 million) at end of April 2020. Additionally, GR's undrawn credit lines amounted to $40 million and 32 million lari (over $10 million) at end of April 2020.

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