Baghlan Group FZCO lost rating with Fitch Ratings

2014 April 03 (Thursday) 16:53:51

Baghlan Group FZCO lost its rankings «B-(EXP)» issuance of guaranteed bonds, planned but not carried out in December last year. The group also lost the right to be listed in the list of issuers rating of international rating agency Fitch Ratings, refuse to pay $ 150 million at the rate of 14.75% on debt (bonds involved in the loan) with no rating. Only 7 March this year was held in partial payment of $ 8 million.

In addition, the long-term Issuer Default Rating (IDR) of the «business empire" of the local businessman Hafiz Mammadov reduced from B- to RD that is limited default.

Issuer ratings were withdrawn as Fitch Ratings does not already have sufficient information to support them. The agency can not assess the current liquidity position and ability to perform group debt maturing, including to local banks. According to analysts, access to medium-term bank financing is constrained by underdeveloped banking market of Azerbaijan, while Baghlan in June 2012 released unrated bonds, which are involved in the loan.

As a result, a situation where a substantial portion of the assets Baghlan, is likely to be assigned as collateral to facilitate refinancing. The agency does not expect to be able to attract a group of Baghlan sufficient funds from banks to refinance amortizing bonds, representing a participation in a loan, in the amount of $ 150 million with a final maturity in 2015

There is a slight conversion of cash flow, the analysts of the agency say. Good profit in the reporting of income in the last three years has not been fully converted into cash flow. Outflow of working capital in 2011 and 2012 led to the company's needs in working capital of approximately 181 million manat at the end of 2012 (inventory plus current accounts receivable, net of current payables). Unless there is a change in the situation of working capital and the payment of significant receivables, liquidity on the balance sheet is likely to continue.

There were observed deferred proceeds from asset sales, although a number of assets has been sold or is in the process of selling, yet to closing deals and receiving cash. The most significant relate to the sale of a portfolio of residential and multi-purpose real estate in the center of Baku. At the same time, any proceeds are likely to be used to repay debt to local banks.

Only satisfactory factor is diversification activities, although the concentration on large contracts is a point of concern. Services in transport and logistics sector benefit from Baghlan strong share in the local market, stable cash flow and preferential contracts with government agencies.

Activity in the construction sector is focused on one major civil contract, and still has a small number of contracts in the order book for 2014 and 2015. Compared with other sectors, this business segment is a higher risk due to volatile levels of working capital and fragmented market share, but profit margins and growth prospects are strong. Oil and gas projects are at an early stage and are still dependent on financial support from the group - says the agency.

Group Baglan Group FZCO in Azerbaijan owns 66.67% equity interest in the company Bahar Energy limited, develops offshore block fields Bahar and Gum Deniz in the Caspian Sea.

It operates in five key market segments: freight and passenger transport, as well as in construction, trade equipment and oil and gas sector. - 17D-