Fitch lifts Sistema view to positive

Fitch Ratings said it revised the outlook on Sistema JSFC's long-term issuer default rating to positive from stable and affirmed its issuer default ratings at BB-.

The agency also affirmed its national long-term rating at A+(rus), senior unsecured debt at BB- and foreign- and local-currency ratings at A+(rus).

Fitch also affirmed the loan participation notes issued by Sistema Funding SA (guaranteed by Sistema) at BB-.

The outlook revision reflects significant de-leveraging at the holding company level and expectations of continuing stable dividends from key subsidiaries, which should be sufficient to resolve legacy support issues for weaker parts of the group, the agency said.

Sistema's key operating subsidiaries, OJSC Mobile TeleSystems and JSC Bashneft, generate strong free cash flow that supports payment of large dividends, Fitch said. Sistema's credit profile is shaped by its ability to control cash flows and extract dividends from these two key subsidiaries.

These positives are overlaid by a significant debt burden at the holding company level, including exposure to substantial off balance-sheet liabilities through its subsidiaries and potential support requirements for weaker assets of the group, the agency said.

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