March 28 – Standard & Poor's Ratings Services has left its 'BB-' long-term corporate credit rating and 'ruAA-' Russia national scale rating on Russian vertically integrated aluminum company Sual International Ltd. on CreditWatch with positive implications on news of the completion of the company's combination with Russia's largest aluminum company, RUSAL (not rated), and with the assets of Switzerland-based trading company Glencore International AG, the agency said in a press release.
The ratings were placed on CreditWatch on October 9, 2006, following the merger announcement.
The new entity, United Company RUSAL, will be the world's largest aluminium company. Under the terms of the transaction RUSAL's shareholders will own 66% of the new group, Sual's shareholders 22%, and Glencore's 12%.
"The CreditWatch placement continues to reflect the possibility of an upgrade, as the combined group's business profile is significantly stronger than that of any of its three units on a stand-alone basis," said Standard & Poor's credit analyst Elena Anankina.
"An upgrade of Sual will, however, depend on United Company RUSAL's strategy, financial policy, and financial risk profile; the degree of Sual's integration and the relative status of its creditors within the new entity; and the new entity's governance practices and efforts to improve transparency," added Anankina.
Resolution of the CreditWatch status will require more clarity about these financial, governance, and strategy factors.
If the new entity has substantial leverage, this may limit the rating upside potential for Sual. S&P said it believed the combined group may have ambitious growth plans and will need to focus on how to reconcile these plans with initial debt levels. At year-end 2005, Sual's adjusted debt was $759 million (including $647.0 million in on-balance- sheet debt, $15.0 million in asset retirement obligations, $78.5 million in guarantees, and $18.0 million in postretirement benefit obligations).
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