Fitch Ratings has assigned Ireland-based GTLK Europe Capital DAC's upcoming issue of US dollar-denominated guaranteed notes an expected 'BB+(EXP)' rating. The final rating is contingent upon the receipt of final documents conforming to information already received.
GTLK Europe Capital DAC is a financing special purpose entity of GTLK Europe DAC (GTLK Europe), an Irish subsidiary of Russia-based PJSC State Transport Leasing Company (STLC, BB+/Stable). GTLK Europe has been established as an operating entity utilising the favourable tax and regulatory regimes of Ireland for the leasing of aircraft and ships. The notes will represent direct, unsubordinated and unsecured obligations of GTLK Europe Capital and will benefit from unconditional and irrevocable, joint and several guarantees from both of STLC and GTLK Europe.
The proceeds will be used mainly for general corporate purposes including refinancing current outstanding US dollar-denominated borrowings.
KEY RATING DRIVERS
The notes' rating is equalised with STLC's Long-Term Foreign-Currency Issuer Default Rating (IDR), reflecting Fitch's view that if required, STLC would have a very strong propensity to honour the obligation under the guarantee due to its publicly expressed commitment to do so, and potential reputational damage from not honouring the obligation.
Fitch upgraded STLC's Long-Term IDR to 'BB+' from 'BB' in August 2019 following the sovereign upgrade and it reflects Fitch's view of a moderate probability of support for the company, if needed, from the Russian sovereign (for more details see ' Fitch Upgrades 21 Russian and Russian-owned Financial Institutions on Sovereign Upgrade' dated 19 August 2019 on www.fitchratings.com).
The facility agreement includes financial covenants relating to STLC (e.g. maintenance of positive net interest income, including operating lease income, and an equity-to-asset ratio of above 10%). The terms of the issue also provide noteholders with a put option in case of the Russian sovereign (BBB/Stable) ceasing to control more than 75% of STLC's and/or GTLK Europe's equity. Both companies are currently ultimately controlled by the Russian government, which is represented by the Ministry of Transport.
The notes' rating is likely to move in tandem with STLC's Long-Term Foreign-Currency IDR.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The long-term rating of notes issued by GTLK Europe Capital is equalised with STLC's Long-Term Foreign-Currency IDR.
Additional information is available on www.fitchratings.com