IBI-Rating has updated the credit ratings of «Ukrzaliznytsia» PJSC and its interest bearing bonds

IBI-Rating informs on the affirmation of the long-term credit rating of «Ukrzaliznytsia» PJSC at uaBB grade with a «developing» outlook. Furthermore, the credit rating of several series of interest-bearing bonds was upgraded from uaBB to uaBBB- grade with a «developing» outlook:

• Series J (UAH 200 million) issued by the «Lviv Railways» STBA (currently is the regional branch of «Lviv Railways» «Ukrzaliznytsia» PJSC);
• Series P (UAH 200 million) issued by the «Odeska Railways» SOE (at present is the regional branch of «Odeska Railways» «Ukrzaliznytsia» PJSC);
• Series P (UAH 32.5 million), series Q (UAH 100 million), series R (UAH 50 million) issued by the «Prydniprovska Railway» SOE (now is the regional branch of «Prydniprovska Railway» «Ukrzaliznytsia» PJSC);
• Series K (UAH 300 million), issued by «Pivdenna Railways» SOE (nowadays is the regional branch «Pivdenna Railways» «Ukrzaliznytsia » PJSC);
• Series O (UAH 300 million) issued by the «Pivdenno-Zakhidna railways» STBA (now is the branch of the «Pivdenno-Zakhidna Railways» «Ukrzaliznytsia» PJSC).

The revision of the credit rating of the bonds is due to the repayment of a significant amounts of interest-bearing bonds (including series of bonds the maturity of which was earlier overdue), timely servicing of series of bonds what remain in circulation, as well as positive dynamics financial results of the Issuer's. «Ukrzaliznytsia» PJSC is formed on the basis of the State Administration of Railway Transport, enterprises and institutions of public transport of railways, which are reorganized by merger.

«Ukrzaliznytsia» PJSC is a natural monopolist on rail transport in the territory of Ukraine, which provides a stable cash flow from operating activities. At the same time the Company depends on state regulation, first of all, setting tariffs for transportation. There is a need for significant investments in the renovation of rolling stock of «Ukrzaliznytsia» PJSC, due to high wear and tear.

Сonformity to the consolidated financial statements prepared according to IFRS, net income of «Ukrzaliznytsia» PJSC in 2016 compared to 2015, increased by 10.7% to UAH 66,570.2 million. Growth of the net income for 3 months in 2017, compared to the same period of 2016, amounted to 21.5% - to UAH 17,966.8 million. According to the results of FY 2016 activity remained unprofitable, while the amount of net damage decreased compared with 2015 by 2.3 times and amounted to UAH 7,322 million. The result of activity for 3 months in 2017 was achieved the net profit of UAH 12.8 million (profit before tax amounted to UAH 127.2 million).

The financing of the activities of «Ukrzaliznytsia» PJSC is carried out including at the expense of borrowed funds, the vast majority of which are nominated in foreign currency. The sensitivity to currency risk is partially reduced by the presence of currency revenues from transit traffic. Several bank loans are undergoing restructuring, which is currently a key factor limiting the level of the Issuer's long-term credit rating. As a result of the completion of the restructuring process, a likely revision of the rating level, as evidenced by the «developing» outlook.

Materials used for conducting the analytical research were obtained from «Ukrzaliznytsia» PJSC, including: financial statements for 2015-2016 and 3 months of 2017, reference information on the activities of «Ukrzaliznytsia» PJSC, information on issues of interest-bearing bonds, other necessary internal information, as well as information from open sources, which the Rating Agency considers to be reliable.

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