Fitch rates Lenta bonds BB-

Fitch Ratings said it assigned a senior unsecured rating of BB- with recovery rating RR4 to Lenta LLC’s recently issued RUB 5 billion bonds, along with a national senior unsecured rating of A+(rus).

In contrast to Lenta’s other traded bonds, the new bonds do not feature an irrevocable public offer by holding company, Lenta Ltd., Fitch said.

The agency said it does not consider the new bonds structurally subordinated to other senior unsecured obligations as Lenta LLC is the major operating company within the group, generating 100% the group’s revenues and EBITDA and holding close to 100% of the group’s assets.

Fitch said it assigned the bond rating in line with Lenta’s long-term local-currency issuer default rating of BB- because the prior-ranking debt, represented by a secured loan, is less than 2x of group EBITDA. The company’s debt mix is expected to be unchanged over the medium term, the agency added.

The company’s ratings reflect its moderate market position and scale as Russia’s sixth-largest food retailer and third largest large-format operator as measured by 2014 sales, Fitch said.

Lenta’s current small size is mitigated by the company’s consistent market-share gains, strong growth opportunities and low competition compared with developed markets due to the fragmented nature of the Russian food retail market, the agency said.

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