S&P drops Borets, notes to BB-

Standard & Poor's said it lowered its long-term corporate credit rating on Borets International Ltd. to BB- from BB.

The outlook is negative.

At the same time, the agency lowered the Russia national scale rating on Borets to ruAA- from ruAA.

In addition, S&P lowered its issue rating on $415 million unsecured notes issued by Borets' wholly owned finance subsidiary Borets Finance Ltd. to BB- from BB. The recovery rating on the notes is 3, indicating an expectation of meaningful (50%-70%) recovery in the event of a payment default.

S&P said the actions follow the sharp devaluation and continued volatility of the Russian ruble, which has heightened the currency mismatch between Borets' revenues and debt. Borets generates about 65% of its revenues in rubles – based on the current exchange rate and breakdown between its Russian and international businesses – while all of the company's debt and reporting is denominated in U.S. dollars.

The agency believes that Borets now has greater dependency on its international businesses and international cash balances to service its U.S. dollar debt, and it views this dependency as concentration risk. Since year-end 2013, the ruble has lost more than half its value against the U.S. dollar, with most of the depreciation occurring in the fourth quarter of 2014.

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