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10.08.2007
Upcoming bond issue by Drogobych Rock Bit Plant assigned uaBBB credit rating
Credit-Rating, a nationally-recognized credit rating agency in Ukraine has today announced the assignment of the uaBBB long-term credit rating to the upcoming UAH25m 3-year issue of registered coupon bonds (B series) by Lviv Oblast-based Drogobych Rock Bit Plant OJSC (`Issuer` or `company`). The company`s primary activity is manufacturing the drilling equipment for oil, geology, coal, ore and non-ore industries. In the course of analysis Credit-Rating considered Issuer`s financial statements for 2002-2006 and 1Q2007 as well as other inside information furnished by the company.
A credit rating of uaBBB is an investment grade rating, indicating an ADEQUATE CAPACITY of an obligor to pay both interest and principal on the given debt liability in the Ukrainian financial market environment. This rating indicates a level of creditworthiness that is more susceptible to adverse changes in commercial, financial and economic conditions than debt obligations with higher investment grade ratings.
Factors maintaining the credit rating:
- The Issuer is a strategic and the only drilling bit manufacturer in Ukraine enjoying almost 60-year experience in this industry.
- The Issuer is associated with Russia-domiciled Volgaburmash OJSC group of companies, which incorporates all large drilling equipment manufacturers in CIS being one of the world`s leading groups in this industry, which allows the Issuer to be provided with the raw materials supply and with the market niche as well as to reduce cost of new items development.
- Issuer`s key figures have been growing during 2001-2006, specifically the assets rose 2.1x to UAH160.2m, the net sales revenues grew 1.3x to UAH117.8m, and the equity increased 1.5x to UAH89.9m.
- Issuer`s equity 3.6x exceeds the planned issue size.
- The demand for the drilling equipment tends to grow entailed by surge in global hydrocarbon and ore extraction.
Factors constraining the credit rating:
- Issuer`s low profitability and decline to 0.56 from 0.78 in equity to asset ratio during 2001-2006, coupled with negative operating cash flows during 2005-2006.
- Issuer`s dependency upon the group with the risk of cash flows redistribution neglecting Issuer`s interests being imposed.
- Company`s vulnerability to fluctuations in metal prices and in currency exchange rates, and to regulating the export operations, which is linked with significant volume of Issuer`s export operations.
Information on all credit ratings assigned in accordance with the Ukrainian national scale may be found in REUTERS, BLOOMBERG and FTN MONITOR information systems.
For further information, please contact:
Information and analytic department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
