OREANDA-NEWS. On 16 March 2009 Southern Telecommunications Company, the largest telecommunications operator in the Southern Federal District of Russia, announced that rating agency Standard & Poor’s has downgraded its credit rating outlook from Stable to Negative and placed the company on Credit Watch.  In addition, the operator’s national scale rating was left at ruA-.

According to Standard & Poor’s analysts, the fact that the company’s rating has been placed on Credit Watch means that its rating could be lowered by one notch or even several notches if the company is unable to refinance some or all of its debt obligations which are approaching maturity.

The main factor which mitigates the risk of STC’s soft liquidity is its assumed support from state-owned banks, which, according to Standard & Poor’s outlook, is set to continue as long as the company is owned by Svyazinvest.

STC intends to have its ratings removed from Standard & Poor’s Credit Watch over the next three months.  According to the general director of STC Alexander Andreev, S&P’s credit downgrade with a negative outlook was to be expected.  At the beginning of 2008 the management of STC, in view of its upcoming peak payments in 2009, devoted special attention to raising the efficiency of its financial activity.

The 2009 budget and business expansion program up until 2013, approved by the board of directors of STC in December 2009, were worked out with a view to anti-crisis measures and positions, which aimed to accumulate the company’s financial resources to repay its financial using in-house funds.  According to our forecasts, the company will have over Rub 2 bln accumulated on its balance sheet by June 2009 (the first peak payment deadline).

At present, the management of STC, alongside Svyazinvest, is involved in a set of negotiations with lending institutions aimed at securing borrowed funds to refinance the company’s debts. In particular, the company’s plans in 2009 call for placing tradable bonds worth Rub 5 bln, and engaging Svyaz Bank to arrange the bond placement.  Also today, a tender was announced for the right to provide additional placement services for the company’s bond placement.

As a result, the range of measures currently under implementation and already implemented for the purpose of refinancing the company’s current debt and improving its credit policy will make it possible successfully meet the peak payments, maintain strategic financial stability while efficiently financing its current operating activity.