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Moody's downgrades Brunswick Rail to B1; negative outlook

Moody's Investors Service downgraded Brunswick Rail Limited's (BRL) corporate family rating to B1 from Ba3, the rating agency informed.

The downgrade reflects the persistently weak pricing environment in the company's core Russian market, and BRL's ambitious growth strategy which effectively prioritises fleet expansion over deleveraging.

At the same time, Moody's noted a number of positive factors, including: Brunswick Rail's robust cash-generating business model, which is underpinned by the multi-year nature of the Company's lease contracts and strong customer base; solid profitability; modern railcar fleet, which has an average age of five years and requires low maintenance capex; $150 million preferred share placement with EBRD; and significant flexibility with regards to expansion capex.

"We acknowledge that the last year has been a challenging one for our sector as a whole, with a relative oversupply of railcars and softening demand in key segments of rail freight transportation. We have already taken a number of successful measures to further strengthen our financial position — measures which we do not believe were fully acknowledged by Moody's in its rating assessment under their adjusted financial metrics, which differs from Brunswick Rail's reported methodology," said Brunswick Rail CFO Nicolas Pascault commenting on Moody's rating action.

Brunswick Rail is a privately owned company in Russia's freight railcar operating lease market established in 2004. The company's total railcar fleet reaches ca. 25,000 (approximately 2% of the total freight rolling stock of Russia). Gondola cars account for 72%, hoppers for 15%, boxcars, tank cars and flatcars for 13% of the company's fleet.

In 2013, Brunswick Rail's revenues under IFRS decreased by 17% to $255.3 million from $306.2 million the year before. Net profit was $28 million, net cash flow from operations was $182.6 million, adjusted EBITDA decreased by 24% to $194.7 million from $257.3 million. Debt to adjusted EBITDA ratio was 3.7x.

RAS net profit of Brunswick Rail Limited for 2012 was $20.1 million against a loss of $18.8 million in 2011. Revenue increased by 67% to $306.2 million from $183.9 million.

"AK&M", 24.04.2014 11:58


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