07.12.2021

Debt reduction may allow Rusal’s rating to be raised

Debt reduction may allow Rusal’s rating to be raised in the future, according to a review by the international rating agency Moody’s, available to RIA Novosti.

At the end of September, the agency upgraded its outlook on Rusal’s ratings at Ba3 to positive from stable, explaining the rating action by the company’s deleveraging since the beginning of this year as a result of higher aluminum prices, which boosted the company’s profit and a substantial inflow of dividends.

Reducing the company’s debt can reduce the risk associated with the likelihood of profit volatility. The review notes that debt repayment is a more expedient solution than refinancing it. At the same time, Moody’s expects that Rusal will retain its stake in Norilsk Nickel as a strategic investment, rather than sell it to pay off its debt to Sberbank.

Actively reduce debt-to-capital “Rusal” may vosprepyatstovat aluminum or cheapening of the ruble against the dollar. “A decline in prices (for aluminum – ed.) May occur if GDP growth in the G20 countries, and in particular in China, which is the largest consumer of aluminum, in 2018 is significantly lower than our current expectations and will be 3.1% and 6.4 % respectively “, – follows from the review.

In addition, Moody’s points to possible negative consequences for Rusal of the strengthening of the ruble.

According to the agency’s estimates, the strengthening of the average annual exchange rate by 5 rubles to 53 rubles per dollar in 2018 will lead to a decrease in the company’s EBITDA by $ 400 million and an increase in the debt-to-equity ratio by 0.7%. In addition, a hypothetical $ 200 million cut in Norilsk Nickel’s dividend could result in a threefold increase in the debt-to-equity ratio.

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