OREANDA-NEWS. Fitch Ratings has assigned Russia-based First Container Terminal's (FCT) RUB5bn notes a final local currency senior unsecured rating of 'BB' with Stable Outlook. The rating of the notes is aligned with the Long-term Issuer Default Rating (IDR) of parent Global Port Investment Plc (GPI), which provides a public irrevocable offer to repurchase the notes.

GPI is rated at Long-term IDR 'BB' (see 'Fitch Rates Global Port 'BB'; FCT's Proposed Notes BB (EXP)' dated 8 December 2015 at www.fitchratings.com)

KEY RATING DRIVERS
The bond bears a coupon of 12.5% per year and has a maturity of 10 years with a mandatory call option for FCT to buy back the bond in March 2021, effectively reducing the maturity to five years. On the closing date, FCT swapped the rouble-denominated bond into USD.

GPI's Op Co to Issue Bonds
Today's bond represents the last of three tranches totalling RUB5bn each issued under a RUB30bn domestic bond programme. The other two RUB5bn tranches were issued in December 2015 and February 2016. FCT is one of GPI's main operating subsidiaries and 100%-owned by GPI, fully consolidated in the group accounts, which generates 35% of GPI's operating cash flow. Outside of the GPI group, FCT is a small player with little market power and exposed to competition.

Irrevocable Offer
Bondholders benefit from an irrevocable offer by GPI. Under this offer, GPI irrevocably and publicly undertakes to purchase the bond following non-payment of interest or principal. This obligation ranks pari-passu with all other direct, unsecured GPI obligations.

If and when the bondholders accept the offer, it turns into a sale and purchase agreement of the bond where GPI is obliged to pay principal, coupon and accrued interest on the 13th business day after non-payment of the rated bond. Under this structure, the parent is strongly incentivised to financially support the issuing entity before it defaults. The probability of default of the rated bond is therefore linked to that of GPI, in our view. As a result, Fitch has aligned the local currency senior unsecured rating of the notes with GPI's Long-term local currency IDR.

Bonds Proceeds for Refinancing
The bonds' proceeds are being used to refinance FCT's outstanding bank loans. GPI's consolidated leverage will therefore not increase as a result of this transaction.

RATING SENSITIVITIES
The rating of the notes is credit-linked to the Long-term IDR of GPI; future development that could lead to negative rating actions on both GPI and the FCT bond include:
-Dividend distributions impacting GPI's expected deleveraging profile
-Fitch-adjusted GPI's consolidated debt/EBITDA remaining above 3.0x over a three-year horizon to 2018 in the Fitch rating case
-Adverse policy decisions or geopolitical events affecting the port sector
-Failure to maintain adequate liquidity to cover GPI's debt service maturities
-Failure to comply with covenants at op cos and consolidated levels
- A material increase in bullet debt or a potential change in shareholder structure with the co-controlling shareholder APMT disposing partly or entirely its stake in GPI, which may affect our analysis of some rating factors such as refinancing risk and potentially GPI's ratings.

Rating upside potential is currently limited. We do not expect improvement in the Russian economy in the near term, as indicated by the Negative Outlook on Russia's sovereign rating.