Page 68 - GEORptSep21

9.2 Major corporate news 9.2.1 Transport corporate news
Fitch affirms rating of Georgian Railway with negative outlook
Fitch Ratings has affirmed JSC Georgian Railway's (GR) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at BB- with negative outlooks.
Among the factors that could, individually or collectively, lead to a negative rating action/downgrade for GR, were, according to Fitch, a downgrade of Georgia's sovereign rating; dilution of linkage with the sovereign, resulting in the ratings being further notched down from the sovereign's, and a downward reassessment of the company's Standalone Credit Profile (SCP), resulting from a deterioration of the financial profile with net debt/EBITDA sustainably above 9x as per the rating case.
Georgian Railway issued, in May 2012, $500mn worth of 10-year bonds denominated in US dollars and carrying a 7.75% coupon. The bonds mature in November 2022.
According to Fitch, key assumptions for the ratings case were operating revenue growth on average at 3.9% in 2020-2024 and operating expenditures growth on average at 4.9% in 2020-2024.
According to Fitch, GR receives mostly non-cash and indirect state support. “Historically, support of GR's long-term development has been via state policy incentives and asset allocations. GR enjoys greater pricing power than its Fitch-rated regional peers. GR's tariffs are fully deregulated, allowing tariffs in both freight and passenger segments to be adjusted to market conditions. Freight tariffs are set in US dollars, resulting in natural hedge for a company that operates in a country with a dollarised economic environment,” Fitch said. The ratings agency considered a potential default of GR on external obligations as potentially harmful to Georgia, as it could lead to reputational risk for the state.
“Both GR and the state tap international capital markets for debt funding, as well as loans and financial aid from IFIs. This leads us to assume that a default of GR could negatively influence the cost of external funds for future debt financing of other GREs or the state itself. It could also significantly impair the borrowing capacity of the latter due to potential reputational damage and the small size of the domestic economy,” Fitch Ratings said.
9.2.2 Aviation corporate news
More airlines resume flights to Batumi on Georgia’s Black Sea coast
Kazakh carrier Air Astana carried out its first Almaty-Batumi direct flight on May 15.
The airline will be carrying out three flights a week from Kazakhstan's largest city to the Georgian Black Sea coast holiday destination using an Airbus 320 during the summer.
Starting May 17, Flynas will also restore its flights to Batumi, flying from Saudi Arabia.
LOT Polish Airlines and Ukraine International Airlines will have regular flights from Warsaw and Kiev to Batumi, respectively, from June.
“We hope that our guests from Kazakhstan will be able to safely spend their holidays in Georgia, including in Adjara,” Georgia's Economy Minister Natia Trnava said in respect of the Air Astana announcement.
68 GEORGIA Country Report September 2021 www.intellinews.com