Fitch ups Kazanorgsintez LPNs to CCC+/RR5

Fitch Ratings said it revised Tatarstan-based chemical producer OJSC Kazanorgsintez's outlook to positive from stable and affirmed its long-term issuer default rating at B-.

The agency simultaneously upgraded the senior unsecured rating on the outstanding $101 million loan participation notes (eurobond) to CCC+/RR5 from CCC/RR6, and affirmed the short-term issuer default rating at B.

Fitch said the outlook revision reflects Kazanorgsintez’s stabilized capital structure and expectations that Kazanorgsintez’s liquidity profile will improve over the next 12 to18 months.

The agency expects Kazanorgsintez to continue generating strong positive free cash flow exceeding RUB 4 billion in 2014 and RUB 3 billion in 2015 on a recovered polyethylene market, low capex and a 30% dividend payout ratio. Coupled with a RUB 1.1 billion cash buffer and RUB 2.3 billion deposits accumulated at end-1H14, this would comfortably cover RUB 6 billion short-term debt falling due in 2H14 and 1H15, including $101 million eurobonds due in March 2015.

Fitch expects the company's funds from operations adjusted net leverage to reduce to 2 times in 2014 and 2015, from 2.2 times to 2.4 times in 2012-2013, on absolute debt reduction and stronger FFO generation.

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