Standard & Poor's: Evraz to reorganize in case of default

The international rating agency gave Evraz Group S.A. unsecured bond issue of $500m B+. This issue’s rating meets the credit rating of Evraz itself. The IDR comes to 4, which marks the average debt compensation expectations (30%-50%) in case of default.

According to Standard & Poor's, the money to be obtained through the issue is mainly intended to refinance current debt.

The agency’s hypothetical scenario provides for the possibility of the company’s weakening paying capacity due to steadily low steel prices, shrinking production output, restructuring, and pay rises.

‘The scenario provides for a default in 2014 when the company finds itself unable to refinance the debt that is due to be paid off and its EBITDA drops down to $1.35bn-$1.41bn. We put off the potential default date by one year compared with our earlier scenario because it is possible the bond issue is a success. Our debt compensation expectations stem from our feeling that in case of default Evraz will get reorganized not liquidated, given the group’s leading position on the domestic market, its vertical integration, low production costs, and geographical diversity,’ Standard & Poor's experts say.


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