S&P Assigned Recovery Ratings to Debt of 21 High-Yield Russian, Ukraine, And Kazakh Corporates

/Standard & Poor's, Moscow, 30.07.08/ - Standard & Poor's Ratings Services said today that it assigned its recovery ratings to 44 unsecured debt issues of 21 corporate issuers in Russia, Ukraine, and Kazakhstan. The issuing entities involved, along with their recovery ratings, are listed further below under the section headed "Ratings List." "Standard & Poor's has changed its issue rating methodology for unsecured debt of issuers rated 'BB+' and below," said Standard & Poor's credit analyst Elena Anankina. "New issue ratings are now based on our assessment of recovery prospects in the event of a payment default and on the issuer credit rating, rather than on any balance sheet metrics such as the ratio of priority debt to net assets." Recovery ratings reflect our estimate of recovery prospects should a payment default occur. The roll-out of recovery ratings in Russia, Ukraine, and Kazakhstan follows three earlier related initiatives: First, the release of our general recovery rating methodology for speculative-grade issuers in June 2007. Second, our assessment of insolvency regimes in Russia, Ukraine, and Kazakhstan. (See related articles titled "Debt Recovery for Creditors and the Law of Insolvency in Kazakhstan," published Feb. 19, 2008, "Debt Recovery for Creditors and the Law of Insolvency in Ukraine," published April 29, 2008 and "Debt Recovery for Creditors and the Law of Insolvency in Russia," published May 7, 2007, on RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com.). Third, the recent roll-out of recovery ratings in North America and Europe (see article titled "Standard and Poor's Extends Recovery Ratings to Unsecured Speculative-Grade Corporate Issues", published March 21, 2008, on RatingsDirect.). Although we apply our general recovery methodology universally to all countries, greater uncertainty and weaker legal regimes in Russia, Ukraine, and Kazakhstan raise a number of specific analytical issues. For example, due to numerous qualitative risks related to the companies' operations in a more uncertain environment, we do not notch issue ratings up from the company's credit rating. At the same time, for the purpose of our unsecured debt analysis, the risk of security or structural priority being enforced cannot be ignored. Therefore, unsecured debt of companies with substantial priority-ranking debt can be notched down. These and other issues are discussed in our Credit FAQ, also published today, titled "Recovery Rating Methodology in Russia, Ukraine, and Kazakhstan." Under the new methodology, most issue ratings involved in this roll-out remain unchanged. Out of 44 issue ratings, only two (those on notes issued by Colgrade Ltd. [part of Delance Ltd.; BB-/Stable/--], and Interpipe Ltd. [B+/Negative/--]) were lowered based on our assessment of low recovery. Because of weak legal regimes in the region, issue ratings are capped at the company's corporate credit rating level and no issue ratings were raised. "In the current market environment, recovery analysis plays an increasingly important role for lenders," added Ms. Anankina. "Looking ahead, the new methodology will bring greater focus on companies' capital structures, and will result in more differentiation between recovery rating levels." Standard & Poor's recovery ratings utilize a numerical scale, with '1+' and 1'--the two highest ratings--denoting different levels of likelihood that an issue will fully recover principal, plus prepetition interest, in the event of default. Ratings below that level--between '2' and '6'--denote varying levels of expected prospects for principal recovery, from just less than 100% to negligible recovery levels (see table immediately below). STANDARD & POOR'S GLOBAL RECOVERY RATING SCALE For issuers with speculative category rating ------------------------------------------------------ Recovery Rating Description of level Recovery Range* --------------- -------------------- --------------- 1+ High expectation, 100 % full recovery --------------- -------------------- --------------- 1 Very high recovery 90 - 100 % --------------- -------------------- --------------- 2 Substantial recovery 70 - 90 % --------------- -------------------- --------------- 3 Meaningful recovery 50 - 70 % --------------- -------------------- --------------- 4 Average recovery 30 - 50 % --------------- -------------------- --------------- 5 Modest recovery 10 - 30 % --------------- -------------------- --------------- 6 Negligible recovery 0 - 10 % ------------------------------------------------------ * Includes principal and prepetition interest RATINGS LIST A list of new recovery ratings and issue ratings is presented below. For the parent company of each issuing entity there is a separate recovery report with more details. These reports are available to subscribers of RatingsDirect. ------------------------------------------------------------------- Issuing Entity Recovery Rating Debt Issue Rating* ------------------------------ --------------- ------------------ ALROSA Finance S.A. 4 ВВ ------------------------------ --------------- ------------------ Azovstal Capital B.V. 4 В- ------------------------------ --------------- ------------------ EuroChem Finance PLC 3 ВВ ------------------------------ --------------- ------------------ C.R.R. B.V. 3 В- ------------------------------ --------------- ------------------ Colgrade Ltd. 5 В+ ------------------------------ --------------- ------------------ Evraz Group S.A. 4 ВВ- ------------------------------ --------------- ------------------ Evraz Securities S.A. 4 ВВ- ------------------------------ --------------- ------------------ Gallery Capital 3 В- ------------------------------ --------------- ------------------ Golden Ring Finance 4 В S.A. ------------------------------ --------------- ------------------ Intergas Finance B.V. 4 ВВ ------------------------------ --------------- ------------------ Interpipe Ltd. 5 В ------------------------------ --------------- ------------------ Kazakhstan Temir Zholy 4 ВВ+ Finance B.V. ------------------------------ --------------- ------------------ Kazanorgsintez S.A. 4 В-/Watch Negative ------------------------------ --------------- ------------------ Megafon S.A 3 ВВ+ ------------------------------ --------------- ------------------ MMK Finance S.A. 3 ВВ ------------------------------ --------------- ------------------ Mobile Telesystems 3 ВВ- Finance S.A. ------------------------------ --------------- ------------------ Novorossiysk Port Capital S.A. 3 ВВ+ ------------------------------ --------------- ------------------ Nutritek International 3 В Corp. ------------------------------ --------------- ------------------ ОАО "Severstal" 3 ВВ ------------------------------ --------------- ------------------ TMK Capital S.A. 4 ВВ- ------------------------------ --------------- ------------------ TNK-BP Finance S.A. 3 ВВ+ ------------------------------ --------------- ------------------ UBS (Luxembourg) S.A. 3 ВВ+ - Issue JCS "VimpelCom" ------------------------------ --------------- ------------------ JCS "VimpelCom" 3 ВВ+ ------------------------------------------------------------------- Contacts for more information: Elena Anankina, Moscow, 7 (495) 783-41-30; Elena_Anankina@standardandpoors.com David Gillmor, London, 44 (207) 176-36-73; David_Gillmor@standardandpoors.com Simon Redmond, London, 44 (207) 176-36-83; Simon_Redmond@standardandpoors.com Marc Lewis, London, 44 (207) 176-70-69; marc_lewis@standardandpoors.com Carlo Castelli, London, 44 (207) 176-36-70 Carlo_Castelli@standardandpoors.com Hina Shoeb, London, 44 (207) 176-37-47; Hina_Shoeb@standardandpoors.com Florence Devevey, Madrid, (34) 91 788-7236; florence_devevey@standardandpoors.com Abigail Klimovich, London, 44 (207) 176-3554; abigail_klimovich@standardandpoors.com [2008-07-31]