The credit rating of Rissa Investments Limited (hereinafter, the Company, or the Group) has been affirmed due to the unblocking of the bank accounts of IDS Borjomi Georgia LLC and the recovery of operations of the Group’s Georgian segment, as well as the release of 2021 consolidated financial reporting that corresponds to the Agency’s initial assessments. The Developing outlook has been retained mainly due to the uncertain prospects of the Ukrainian market, which, according to ACRA, accounted for 37% of the Company’s revenues in 2021.
ACRA retains its medium assessment of the Company’s business profile and continues to highly rate its market position, which is largely due to the presence of well-known brands in the Group’s portfolio. The Group’s financial risk profile continues to be characterized by a medium assessment of leverage, high profitability, and negative free cash flow (FCF).
Rissa Investments Limited is a holding company that consolidates bottled water production assets in Russia, Georgia, and Ukraine. The portfolio of the Company’s brands includes Borjomi, Saint Spring, and others.
key assessment factors
Recovery of operations of the Georgian segment. In April 2022, information emerged stating that the Company had decided to suspend the operations of its Borjomi plants due to difficulties encountered by IDS Borjomi Georgia LLC in receiving foreign currency revenues. According to the Group, its foreign currency accounts were unblocked by Georgian banks following the key shareholder’s decision to transfer part of its stake to the Georgian Government and reduce its share in the Company to below 50%. This allowed the Georgian segment to resume operations. ACRA positively views the resumption of production at the Borjomi plants. However, the Developing outlook is still in place due to the uncertainty surrounding the Ukrainian market.
Leverage is still assessed as medium. The structure of the Group’s debt continues to be stable — the basis of the debt portfolio is a bond issue, as well as loans from Sberbank (ACRA rating AAA(RU), outlook Stable) and JSC “ALFA-BANK” (ACRA rating AA+, outlook Positive). According to the Group’s audited consolidated financial statements, the ratio of total debt to FFO before net interest payments was 2.1x in 2021 and the ratio of FFO before net interest payments to interest payments was 7.2x, which corresponds to medium leverage. ACRA maintains its forecast for 2022 in the range of 2.0–2.5x and 3.0–4.0x, respectively.
The high liquidity assessment has been maintained due to the Group’s sufficiently comfortable debt repayment schedule — major repayment of debt is expected in 2024, during which a put option for the bond issue is to be exercised. The rest of the debt is repaid relatively evenly. The presence of undrawn credit lines also positively affects the assessment of this factor. The main pressure on liquidity, according to ACRA, may come from FCF, which, according to the Agency’s forecast, may be negative in 2022.
KEY ASSUMPTIONS
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Maintaining production volumes of the Georgian segment in 2022 at the 2021 level;
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Maintaining production volumes of the Russian segment in 2022 at the 2021 level;
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Production volumes of the Ukrainian segment falling by 10–20% in 2022 compared to 2021;
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Capital expenditures program reduced to 10–20% of revenues in 2022–2024;
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No dividend payments until complete recovery of all the Group’s sales markets;
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Access to external liquidity sources.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Developing outlook indicates a variety of trends: the rating may stay unchanged, be upgraded or downgraded.
A positive rating action may be prompted by:
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Weighted average ratio of total debt to FFO before net interest payments declining below 2.0x;
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Weighted average ratio of FFO before net interest payments to interest payments growing above 5.0х;
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Positive FCF profitability.
A negative rating action may be prompted by:
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Weighted average ratio of total debt to FFO before net interest payments growing above 3.5x;
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Weighted average ratio of FFO before net interest payments to interest payments declining below 2.5х;
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FFO profitability before fixed payments and taxes falling below 12%;
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Any dividend payments before the complete recovery of all the Group’s sales markets;
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Changes to the structure and membership of the Group which may lead to a deterioration of financial performance and infringement of creditors’ rights;
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Worsened access to external liquidity sources.
rating components
Standalone creditworthiness assessment (SCA): a-.
Support: none.
ISSUE RATINGS
Bond issued by Borjomi Finance LLC, series 001P-01 (RU000A102SK1), maturity date: February 20, 2026, issue volume: RUB 7 bln — A-(RU).
Rationale. The issue represents senior unsecured debt of Borjomi Finance LLC, a subsidiary of Rissa Investments Limited. The credit rating is based on a guarantee from Rissa Investments Limited, public irrevocable offers from the Group’s trading companies (IDS Borjomi Beverages Co. N. V., Curacao, and LLC “IDS Borjomi (Moscow)”), its plants in Russia (LLC “Aqua Star” (Kostroma) and LLC “Edelweiss L” (Lipetsk)), and Georgia-based IDS Borjomi Georgia LLC. Despite the existence of suretyships from the key operating companies of Rissa Investments Limited, ACRA applied the detailed approach to assess the reimbursement rate due to a significant amount of secured debt and a noticeable time difference between the dates of bond purchases for different groups of offerors. According to this approach and the Agency’s methodology, the recovery rate for the issue is category II, and therefore the credit rating of the issue is equal to the credit rating of Rissa Investments Limited, i.e. A-(RU).
REGULATORY DISCLOSURE
The credit ratings of Rissa Investments Limited and the bond (RU000A102SK1) issued by Borjomi Finance LLC, a subsidiary of Rissa Investments Limited, have been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments on the National Scale for the Russian Federation was also applied to assign the credit rating to the above issue.
The credit ratings of Rissa Investments Limited and the bond (RU000A102SK1) issued by Borjomi Finance LLC were published by ACRA for the first time on May 21, 2020 and February 26, 2021, respectively. The credit rating of Rissa Investments Limited and its outlook and the credit rating of the bond (RU000A102SK1) issued by Borjomi Finance LLC are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on data provided by Rissa Investments Limited, information from publicly available sources, and ACRA’s own databases. The credit ratings are solicited, and Rissa Investments Limited participated in their assignment.
Deviations from approved methodologies: the Geographical Diversification factor was assessed with a deviation from the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation taking into account the geography of the Company’s operations and its key sales markets.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to Rissa Investments Limited and Borjomi Finance LLC. No conflicts of interest were discovered in the course of credit rating assignment.
