FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
“Ukraine’s macroeconomic fundamentals such as moderate public and In This Issue: external debt ratios and strong growth prospects now merit an upgrade.” Fitch Upgrades Ukraine 1 — Edward Parker, Senior Director, Sovereigns, Fitch Ratings
Introduction 2 Sovereign Update 3 Fitch Upgrades Ukraine Financial Institutions Update 4 On January 21, Fitch Ratings upgraded Ukraine’s Long-term foreign Energy Update 5 and local currency ratings to ‘BB-’ (BB minus) from ‘B+’. At the same time the agency upgraded the Country Ceiling to ‘BB-’ (BB minus) Metals Update 6 from ‘B+’ and affirmed the Short-term rating at ‘B’. The Outlook on Telecom Update 7 the Long-term ratings is Stable.
IPF Update 8 The non-violent “orange revolution”, Mr. Yushchenko’s presidency, Research Highlights 9 prospective constitutional reforms and the turnover in power should strengthen democratic institutions, checks and balances, governance Fitch Corporate News 11 and prospects for long-term political stability. Mr. Yushchenko’s track Credit Ratings Assigned record suggests he will implement prudent macroeconomic policies By Fitch To CIS Issuers 12 and structural reforms, which should improve the business climate. International goodwill should facilitate accession to the World Trade Contacts in Russia and CIS 16 Organization, better relations with the IMF and World Bank, and possibly a roadmap towards EU accession, although entry itself
would remain a distant and uncertain prospect. Overall, Mr. Yushchenko’s policies should be positive for economic prosperity and Ukraine’s creditworthiness. However, he faces daunting challenges: to unite the country, repair relations with Russia, advance economic reforms, cleanse the establishment and tackle vested interests while building a political consensus, and to navigate “events”. Moreover, constitutional reforms will start to dilute his powers from September 2005 to March 2006.
«The rating's upgrade was a direct reaction to the completion of election campaign in the republic and election of Viktor Yushchenko to the post of president. The upgrade will provide Ukrainian banks with more favourable terms of fundraising on MOSCOW global markets. Consequently, large Ukrainian banks may accelerate steps to enter Fitch Ratings CIS Ltd. Ducat Place II the Eurobond market”, - Vyacheslav Yutkin, President of NRB-Ukraine bank 7 Gasheka St., Bld. 1 (Kiev) (Interfax) Moscow 123056 Russia T. + 7 095 956 9901 "I think Fitch's move is still earlier than expected. We made the case that the strong F. + 7 095 956 9909 macro-economic fundamentals were still in place in Ukraine and that they are www.fitchratings.ru looking even better now that Yushchenko is going to take over," - Jens Nystedt,
Senior Emerging Markets Economist,. Deutsche Bank, London (Interfax)
LONDON
Fitch Ratings
Eldon House 2 Eldon Street London EC2M 7UA UK Т. +44 207 417 4222 F. +44 207 417 4242 www.fitchratings.com
24 March 2005
FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Introduction
NATASHA PAGE, Managing Director, CEE & CIS Fitch Ratings T. + 7 095 956 9901 F. +7 095 956 9909
Welcome to the second issue of Fitch Ratings CIS Quarterly Newsletter, which aims at keeping you informed of Fitch’s activity in Russia and the CIS and of the latest credit trends across the sectors rated by Fitch in the region.
I take this opportunity to inform you of Fitch’s incorporation into the Lehman Brothers Global Family of Indices methodology when calculating the index quality assigned to individual securities. The new classification methodology will assign each security the middle rating from the three agencies – Fitch, S&P and Moody’s, and will come into effect on July 1. The inclusion of Fitch’s ratings into Lehman's bond indices has important consequences for Russian issuers: they will have access to the most conservative institutional investors in the US and Europe, which have unprecedented, for Russia’s scale, portfolios under management. These changes may create technical demand for Russian issuers’ debt instruments for several billion of US Dollars. This will be an additional factor in attracting investment to the country. It’s worth mentioning that at the end of last year, Merrill Lynch included Fitch ratings into its index methodology.
I am also pleased to say that Fitch has been named "Best European Rating Agency" for 2004 by the readers of International Securitisation Report (ISR), and "Best Rating Agency for Securitisation" for 2004 by the readers of Structured Finance International ("SFI"), a Euromoney publication. This is the fifth time that Fitch has received each of the awards in the past six years.
We are very pleased by Lehman Brothers' decision to incorporate Fitch's ratings into its indices, and by the awards received, which reflect the excellent work of our analytical and capital markets teams. We will continue to maintain highest standards of our work, the most obvious example of which has been our activity in Russia and CIS region.
Sincerely,
Natasha Page
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Sovereign Update
SHARON RAJ EDWARD PARKER Director, Sovereigns Senior Director, Sovereigns
London London
T. + 44 20 7417 6341 T. + 44 20 7417 6340
[email protected] [email protected]
NICK EISINGER Director, Sovereigns London T. + 44 20 7417 4341 [email protected]
OIL IN THE CIS - OPPORTUNITIES AND RISKS
High oil prices underpin a favourable near-term outlook for oil-rich Russia, Kazakhstan and Azerbaijan, but the region’s mineral wealth presents additional challenges and risks.
In a Special Report issued on 16 March, Fitch says that near-term economic prospects are supported by large development projects in Kazakhstan and Azerbaijan and continuing high oil prices. Fitch has recently revised its 2005 oil price assumptions to a Brent price average of USD43/barrel (compared to USD38/barrel previously) and a Urals average of USD39/barrel. Against this background, the near-term fiscal outlook for all three countries remains favourable, notwithstanding their plans for fiscal loosening.
“In Russia, for example, we estimate that assets above the Stabilisation Fund ceiling, which could potentially be at used to pay down external debt, could reach USD25 billion by end-2005,” says Sharon Raj, author of the report, and a Director in Fitch’s Sovereigns team.
For all three countries, mineral wealth has been a clear rating strength to date. Rising oil revenues have been used prudently: general government budgets have been held in surplus for several years and government debt burdens have been reduced. In addition, large inflows of foreign exchange have enabled the accumulation of central bank reserves and foreign assets in oil funds.
Nonetheless, high dependence on commodities leaves all three economies vulnerable to oil price shocks. Secondly, upward pressures on the exchange rate can complicate monetary policy management, as has occurred in Russia, and risk hampering the development of the non-oil sector. Thirdly, in times of high oil prices complacency over structural reforms and pressure to loosen fiscal policy can rise, as ongoing events in Russia are highlighting.
Finally, while public sector balance sheets have strengthened, the private sectors in both Russia and Kazakhstan have been riding the wave of improving sovereign creditworthiness to step up their external borrowing. This trend brings new risks at corporate and bank level, which could have implications for economic performance and sovereign risk if they are not well managed.
“High oil prices alone will not guarantee further positive rating actions. Rating prospects also hinge partly on progress in developing and maintaining adequate export capacity; how the resulting oil wealth is managed; and how the authorities cope with the extra economic challenges that it brings,” Ms. Raj adds. “Other factors, such as political developments, will have a major bearing on the ratings too.”
A copy of the full report, “Oil in the CIS: Economic and Sovereign Rating Implications”, is available on the Fitch website at www.fitchratings.com.
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Financial Institutions Update
JAMES WATSON Director, Financial Institutions Moscow T. + 7 095 956 9901 [email protected]
PROSPECTS OF SUBORDINATED DEBT ISSUANCE
This year has already seen the first-ever public issues of subordinated debt by Russian banks. At the beginning of February, Vneshtorgbank placed USD 750 million of notes maturing in 2015, followed closely by a USD 1 billion ten- year issue by Sberbank. Fitch rated each of these issues ‘BB+’, i.e. one notch below the Long-Term ratings of the banks, reflecting the higher expected loss for more junior debt instruments.
What are the prospects for further subordinated issuance out of Russia, in particular from privately-owned banks, in the near-term? A number of factors would seem to make this probable. Like Sberbank and VTB, many privately-owned institutions have experienced a reduction in IFRS and regulatory capital ratios, as rapid growth of risk-weighted assets has been accompanied by more modest internal capital generation. At the same time, the cost of (required return on) equity, whether raised from existing or new shareholders, remains high for these banks, making alternative means of financing growth, especially those which do not involve dilution of control for current owners, potentially attractive. Add in the market’s and the regulator’s acceptance of the two state banks’ issues, and the case for subordinated debt issuance from privately-owned Russian entities seems to be compelling.
However, there are important reasons why, in Fitch’s opinion, such issuance is unlikely to be forthcoming in significant amounts in the short-term. First, notwithstanding recent reductions, the capital ratios of most privately-owned Russian banks rated by Fitch are not yet close to the domestic regulatory minimum. Secondly, and most importantly, it is far from clear that there would be sufficient market appetite for the higher-risk subordinated debt of these banks, which are at best rated by Fitch four notches lower than Sber and VTB. The minimum five-year tenor required for subordinated debt to qualify as BIS Tier II or Russian regulatory capital would also be likely to have a significant impact on investor demand. (No senior unsecured eurobond issue of privately-owned Russian bank since the 1998 crisis has so far had a tenor of more than three years.) Finally, even if demand were forthcoming, returns required by investors, albeit significantly less than the cost of equity, could still be very high. For these reasons, it is more likely that the banks will raise subordinated debt from private placements with existing shareholders rather than by tapping public markets.
In Kazakhstan, however, the situation is somewhat different. Banks’ capital ratios have come under more pressure than those in Russia. The leading privately-owned banks rated by Fitch (Kazkommerts and Halyk) are, at ‘BB’, two notches above their Russian counterparts, and market appetite for longer-dated senior debt of Kazkahstan banks has already been demonstrated by the large ten-year issues of Kazkommerts and Turan Alem. Furthermore, Kazkommerts last year placed a debut international ten-year USD100m subordinated debt issue, and many of the leading Kazakh banks have also placed subordinated debt domestically, with local pension funds being active buyers. For these reasons, Fitch views further international subordinated debt issuance by Kazakhstan banks to be more likely than that of their Russian privately-owned counterparts in the near-term.
1Q05 also saw the first international subordinated debt placement by a Ukrainian bank, when state-owned Ukreximbank placed USD40m of notes, due in 2010. This issue was rated ‘B’ by Fitch, two notches lower than the bank’s Long-term rating, due to the higher expected loss for more junior debt instruments and an interest deferral clause. While the capital ratios of many privately-owned Ukrainian banks, like those in Kazakhstan, are lower than their Russian counterparts, the low rating of these banks, and their so-far limited exposure to international capital markets, mean that significant subordinated debt issuance out of Ukraine in the near-term is, in Fitch’s view, unlikely.
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Energy Update
JEFFREY WOODRUFF, CFA
Director, Corporate Ratings
(Energy), Moscow
T. + 7 095 956 9901
SLOWING RUSSIAN OIL PRODUCTION UNLIKELY TO HAVE RATING IMPACT
The ratings of Russian oil companies are unlikely to be affected by the recent slowdown in crude production, rather, the recent production decline seems to be related to the transition in ownership of Yukos, a short-term problem, instead of the beginning of an industry wide trend.
A recent report published by the International Energy Agency (IEA) warns that growth in the supply of non-Opec crude is showing signs of weakening. Slowing output from Canada, Norway and the Gulf of Mexico has caused concern about lower non-Opec supplies in 2005, causing the agency to reduce its global production forecast by 175,000 barrels per day.
Adding to concern are expectations of a slowdown in Russian production specifically. According to the IEA, Russian oil production has dropped by 400,000 barrels a day from its peak in September of 9.66m b/d. The IEA attributed the fall to the politically motivated break-up of Yukos, formerly Russia's largest oil producer, and said “recent months have seen a sharp tailing off in growth which, if continued, points to a less pre-eminent role for Russian supply growth for 2005.”
The IEA goes on to forecast Russian oil output rising by just 350,000 barrels per day versus previous expectations of an increase closer to 430,000. The new production forecasts result in a downward revision of growth expectations for the year to 3.8% from the previous 4.7%. For 2004, the IEA reported Russian production growth of 8.7%.
Expectations of slower Russian crude production do not come as a surprise, and are fully incorporated into the credit ratings of the companies we cover. It therefore seems highly unlikely that any rating downgrade would result solely from slowing production growth. Industry wide production declines, however, are another matter entirely.
The IEA’s revised production growth estimate brings Russian companies into line with the international super-majors. A recent study by research group Wood Mackenzie reports production from the world’s top 10 oil companies (which account for 20% of the world’s oil production) is expected to increase on average by just 3.5% per annum between 2003 and 2008. If problems with related to Yukos’s production unit are resolved in a timely manner, Russia could once again find itself with more favourable production growth rates. In fact, the Russian Federal Energy Agency is confident that output growth of Russian oil companies will continue to grow by 6 – 8% at least through 2005 while Transneft is predicting oil output will rise by 5.5 – 6% in 2005.
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Metals Update
SONYA DILOVA Associate Director, Corporate Ratings (Industrials), London T. + 44 207 417 3485 [email protected]
TOP RUSSIAN STEEL MAKERS’ STRENGTHENING CREDIT PROFILES
The credit profiles of the top Russian steel makers are strengthening due to a combination of healthy steel market conditions, domestic economic growth and increased vertical integration, which may lead to improved rating profiles in the future. The major Russian steel manufacturers are MMK (BB minus/Stable), Mastercroft (Evraz Securities S.A. - ‘B’/’B’/Positive) and Severstal (‘B+’/’B’/’A(rus)’/RWN).
Robust Chinese demand, which accounted for about 28% of global steel consumption in 2004, has led to sharply higher selling prices, with export prices from the CIS to the Far East rising by about 72% in 2004 to about USD487 per tonne. At the same time, improved economic growth within Russia has helped to increase domestic steel demand, which rose by about 7% in 2004. Fitch expects the positive market momentum driving the global steel industry in 2004 to continue to benefit Russian steel companies in 2005.
Certain major Russian steel companies (e.g. Mastercroft and Severstal) have also benefited from increased control over raw materials. This helps mitigate price rises notably in iron ore and coking coal and preserve their low-cost competitive advantage against many international peers. This is evident in the strong EBITDA margins of 30%-40% seen in FY04, compared to the industry average of 18%. This in turn provides financial flexibility to accommodate potential raw material price increases, notwithstanding their captive supplies. Healthy finances are further underpinned by low leverage (net debt/EBITDA) ratios of below 1.0x (e.g. Mastercroft and Severstal), while MMK enjoyed a cash surplus at FYE04.
Against this backdrop and the still fragmented nature of the global steel industry, Fitch considers the main uncertainty to be event risk associated with potentially large debt-financed acquisitions. Further consolidation within the Russian steel industry appears unlikely due to vested private interests and some key players’ focus on organic growth and strengthening their vertical integration. However, there has already been evidence of recent corporate activity by these players outside Russia, for instance Severstal’s bid for Canada-based Stelco (not rated) and its investment in Italy-based Lucchini. Further corporate activity elsewhere in the CIS may offer further opportunities.
Fitch continues to monitor the progress in addressing corporate governance concerns, which remain a constraint on ratings. While the privatisation of the Russian steel sector has been completed with the sale of the government’s 17% stake in MMK in December 2004, transparency in the top Russian steel companies remains limited due to complex legal structures and dominant private owners. Fitch notes also that a significant share of gross debt (around 30% and 45%, respectively in Severstal and Mastercroft) remained secured, reflecting the reliance on Russian banks as the main source of funding. However, some comfort is gained from the issuance of unsecured notes during the last two years (e.g. MMK, Severstal and Mastercroft) and an international listing of Mechel (not rated) in December 2004, which demonstrated access to debt and equity capital markets.
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Telecom Update
NIKOLAI LUKASHEVICH, CFA Director, Corporate Ratings Moscow, T. + 7 095 956 9901 [email protected]
RUSSIAN TELECOMS UNDERGOING MASS MANAGEMENT RESHUFFLE
In 4Q2004 and the beginning of this year Svyazinvest has run a mass management reshuffle in its subsidiaries replacing CEOs with new, sometimes nearly unknown faces or retaining the old ones for unreasonably short periods of time. So far CEOs were replaced in Dalsvyaz, Uralsvyazinform and Southtelecom. The contract with Mr. Amaryan, CEO of Centertelecom, was renewed for just 6 months after expiration at end-2004. In North-West Telecom a new CEO was appointed in July 2004, while it is widely expected that CEO in Volgatelecom will be replaced after his contract term in office expires later this year. Only in one company, Sibirtelecom, the contract with the incumbent CEO was extended for two more years.
Svyazinvest commented that its goal was to ensure management rotation which in theory should help its subsidiaries to cope with new operating and competition challenges. However, in practice mass replacement of senior management may result in a loss of stability. New CEOs are likely to initiate management changes on lower levels which may lead to lower operating efficiency, at least temporarily. It took telecoms incumbents quite a while to come up with concise strategies after consolidation two years ago. Now that strategic targets have been finally defined, the new management teams are charged with implementation of goals developed by their predecessors. New CEOs are likely to initiate fresh strategic initiatives which may lead to a dilution of strategic focus for quite a while. Historically also, Svyazinvest has so far been rather slow in making changes to approved plans.
Also, Svyazinvest itself is on the verge of privatization process that may take place as early as end of this year. It has also seen quite a few replacements at the senior level with more lay-offs expected in near future. Thus, Svyazinvest is likely to exercise less stringent control over its subsidiaries and get less interested in developing long-term plans being much more concerned about short-term privatization implications.
Stability in the industry has also been recently shaken by tax authorities charging a retroactive tax claim of Rub 718 mln against Dalsvyaz with possible implications for all other telecom incumbents. Although for the time being Fitch believes that an impact on the credit quality will be limited reflecting the size of the claims and good prospects for a court appeal, the impact will be more severe if Dalsvyaz does not successfully defend its case in the court.
A key issue is whether this tax claim is a one-off issue, or could be applied to other years as well. Since 2003 settlement rules have changed and become much more transparent, there are good reasons to believe that new practices are more in line with requirements of the tax authorities. However, if it is extended to other years or other regional telecoms, the financial implications for the sector may become much more severe, suggesting a negative impact on the segment's credit quality.
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
International Public Finance Update
ANDREI PISKUNOV Analyst, International Public Finance Moscow T. + 7 095 956 9901
SOCIAL BENEFITS REFORM
The first quarter of the year was marked by the beginning of the social benefits system reform. The prime aim of the reform, which has led to considerable social protest in some Russian regions, was to improve the financial conditions of the public sector companies by replacing several social benefits by cash allowances for specific citizen groups and also to ensure more transparency in the financial flows between the regional budgets and its public sector companies. The need for such change was justified by the heavy burden that was placed on the regional budgets by the public sector entities that were not able to cover costs with tariffs charged and invoiced the regional budgets for the services provided to socially privileged groups. Despite the fact that the previous system of subsidizing municipal companies resulted in large payable arrears and under-financed capital expenditure of the companies, it also allowed the regions to limit social service expenditure. Under current system the burden of social allowances payments may prove to be much higher than originally planned and local authorities will have to face higher expenditure costs as well as making cash payments which will be indexed to the rise in tariffs. As a result of the reform we could see an increasing polarization between the regions in Russia in terms of credit profile. Those with diversified economies and/or with a strong presence of mining, gas & oil, metallurgy-related industries or any other export oriented industry, which provides the regional budgets with stable flows of payments through CIT and PIT, would be able to solve the problems of the municipal companies and avoid social and political unrest which marked the beginning of the reform. On the other hand, the regions that depend upon federal transfers would be placed in conditions where the social payments provision will become a first priority item, increasing budget rigidity, deficits and re-channeling much needed capital expenditure funding to the continued provision of subsidized public services.
REPUBLIC OF SAKHA (YAKUTIA) UPGRADED
At the end of March Fitch upgraded the long-term international rating of Republic of Sakha (Yakutia) from “C” to “B+”. The new rating reflects stable operating performance of the Republic, high degree of control over main budget revenue sources as well as favorable debt restructuring and gradual write-off agreement with the Federal centre. The local economy has demonstrated high growth rates of the natural resources orientated industries which allowed for stable tax and other income inflows to the regional budget. Taking into account that the back-bone of the regional economy is represented by ALROSA diamond company, where the Republic’s government has a controlling stake, the dependence of the region on the natural resources industries appears less threatening, yet low possibilities of diversification in the local economy still pose some concern. The debt structure of the region is dominated by the low quality federal loans provided for the needs of the “Northern shipment” program, yet currently the region has been able to renegotiate the terms of these debts with a gradual write-off of the substantial part, provided that the appropriate budgetary discipline is maintained. The prospects of the region are closely linked to its efforts aimed at debt structure improvement and ability to continue with the current trend in the new budgetary and social benefits system.
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Rating Actions Highlights Fitch Upgrades Russia’s Ak Bars Bank (22.03.2005) Fitch Assigns Republic Of Sakha (Yakutia) National Long-Term 'A(Rus)'; Outlook Stable (22.03.2005) Fitch Rates Ukraine's Khreschatyk 'B' (21.03.2005) Fitch Upgrades Republic Sakha (Yakutia) To ‘B+’; Outlook Stable (17.03.2005) Fitch Assigns Atf Bank’s Upcoming Eurobond Expected ‘B+’ Rating (10.03.2005) Fitch Rates Belarus’ Belgazprombank ‘B-‘ (09.03.2005) Fitch Assigns Promsvyazbank’s Eurobond ‘B’ Rating (02.03.2005) Fitch Assigns Russia’s Mbrd’s Eurobond Final ‘B’ Rating (02.03.2005) Fitch Assigns Ukreximbank’s Sub Debt Issue ‘B’ Rating (01.03.2005) Fitch Assigns Centertelecom National ‘Bb(Rus)’ Rating; Outlook Stable (21.02.2005) Fitch Changes St. Petersburg’s Bank Menatep Outlook To Positive (17.02.2005) Fitch Upgrades Moscow Bank For Reconstruction And Development To ‘B’ (17.02.2005) Fitch Assigns St. Petersburg National Rating ‘Aa(Rus)’; Outlook Positive (17.02.2005) Fitch Upgrades National Rating Of Lipetsk Oblast From ‘A+(Rus)’ To ‘Aa-(Rus)’ (17.02.2005) Fitch Upgrades Sistema’s Long-Term Ratings To ‘B+’; Outlook Stable (17.02.2005) Fitch Assigns Final ‘Bb+’ Rating To Sberbank’s Sub Debt Issue (16.02.2005) Fitch Assigns Final ‘Bb+’ Rating To Vneshtorgbank’s Sub Debt Issue (15.02.2005) Fitch Assigns Final ‘B+’ Rating To Bank Centercredit’s Eurobond (11.02.2005) Fitch Puts Severstal National Rating On Negative Watch, Lucchini Acquisition Impact Limited (11.02.2005) Fitch Rates 2nd Issuance Of Russia International Card Finance Notes ‘B+’ (10.02.2005) Fitch Assigns Ukreximbank’s Eurobond ‘Bb-‘ Rating (07.02.2005) Fitch Assigns Final ‘B+’ Rating To Alfa’s Eurobond (07.02.2005) Fitch Upgrades Belarusbank’s Individual Rating (04.02.2005) Fitch Assigns Kazkommertsbank’s Eurobond Expected ‘Bb’ Rating (02.02.2005) Fitch Upgrades Three Ukrainian Banks (24.01.2005) Fitch Upgrades Naftogaz Of Ukraine To ‘Bb-‘; Outlook Stable (24.01.2005) Fitch Upgrades Ukraine To ‘Bb-‘ (21.01.2005) Fitch Upgrades Kazakhstan’s Bank Caspian (13.01.2005)
Recently Published Comments Fitch: Top Steel Makers’ Strengthening Credit Porfiles (04.03.2005) Fitch: Is EU Single Banking Market About to Become Reality? (28.02.2005) Fitch: Legal Risk to Remain a Russian Domestic Affair After Yukos Dismissal (28.02.2005) Fitch: Russian Telecom Face Heightened Tax Uncertainty (18.02.2005) Fitch: European Industrials Outlook 2005 Stable to Positive (11.02.2005) Fitch: Social Benefits Reform In Russia May Increase Disparities in Regional Development (10.02.2005) Fitch: European High-Yield Defaults Down 90% in 2004 (08.02.2005) Fitch Warns of Risks to Emerging Markets from Rising US Interest Rates (07.02.2005) Fitch: Yukos Default Likely to Have Little Impact on Central European and Chinese Refineries (21.01.2005) Fitch: European High Yield Market Set For Another Record Year in 2005 (19.01.2005)
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Recently Published Special Reports Oil in the CIS: Economic and Sovereign Rating Implications (16.03.2005) Improving Subnationals’ Creditworthiness (15.03.2005) EEMEA: Evolution of Securitisation Through 2004 and Outlook for 2005 (14.03.2005) Emerging Markets Outlook 2005 (16.02.2005) Ukraine (16.02.2005) 2005 European Energy Outlook (14.02.2005) European Industrials – Outlook for 2005 (10.02.2005) Global Structured Finance: 2005 Outlook and 2004 Review (21.01.2005) European TMT Sector: Outlook for 2005 (06.01.2005) 2005 European RLCP Outlook Summary (04.01.2005)
To obtain a copy of any of the research mentioned above please contact Alla Izmailova in the Moscow office of Fitch Ratings at + 7 095 956 9901 or [email protected], or visit our global website at www.fitchratings.com or Russian language website at www.fitchratings.ru.
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FITCH CIS QUARTERLY NEWSLETTER MARCH 2005
Fitch Corporate News
FITCH RATINGS TO BE ADDED INTO LEHMAN BROTHERS BOND INDICES
On January 24, Lehman Brothers announced changes to the inclusion rules for its Global Family of Indices, altering the methodology by which it incorporates credit rating information into its indices. Effective July 1, 2005, the new methodology will incorporate the ratings of Fitch alongside those of Moody's and Standard & Poor's (S&P) when calculating the index quality assigned to individual securities.
As stated in the Lehman press release: 'The new classification methodology will assign each security the middle rating from the three agencies. This approach implies that two out of the three agencies need to rate the security investment- grade for the security to be eligible for Lehman Brothers Investment Grade Aggregate indices.' Lehman's U.S. Credit Index will add 59 securities with a market value of approximately $33.4 billion as a result of the new rules.
'We are pleased by Lehman Brothers' decision to incorporate Fitch's ratings into its indices,' said Stephen Joynt, President and CEO, Fitch Ratings. 'Fitch is committed to providing a choice of credit opinions to the corporate bond markets. We have expanded the breadth of our coverage by industry and geography and have analytic depth across the corporates, banking, and structured markets. Investors recognize the value of a Fitch rating and our willingness to talk them through all the key issues.'
Lehman Brothers announced the changes in a press release issued on Jan. 24, 2005.
FITCH WINS ISR EUROPEAN STRUCTURED FINANCE RATING AGENCY AWARD AND SFI BEST RATING AGENCY FOR SECURITISATION AWARD 2004
Fitch Ratings has been voted "Best European Rating Agency" for 2004 by the readers of International Securitisation Report (ISR), and "Best Rating Agency for Securitisation" for 2004 by the readers of Structured Finance International ("SFI"), a Euromoney publication. This is the fifth time that Fitch has r