Tuesday, November 13, 2007

Romania's Marfa cut to 'CCC' on weak liquidity position - S&P

MUMBAI, Nov. 13, 2007 (Thomson Financial delivered by Newstex) -- Standard & Poor's (NYSE:MHP) Ratings Services cut its long-term corporate credit rating on CFR Marfa SA to 'CCC' from 'B-', indicating the Romanian rail freight company is currently vulnerable to nonpayment, and is dependent on favourable external conditions to meet its financial obligations.

The agency also revised the implications of the ratings' creditwatch status to developing from negative.

'The downgrade reflects further delay in finalizing the refinancing facility and Marfa's increasingly weak liquidity position before the repayment of its 120 mln eur Eurobond due on Dec 10 2007, compared with our expectation of a mid-November closing,' said S&P's credit analyst Eugene Korovin.

He however added that Marfa appears to have received preliminary refinancing commitments from creditors, which together with Marfa's liquidity reserves may cover the principal and coupon on the 120 mln Eurobond and other short-term liquidity needs.

S&P said the downgrade also reflects weakened probability for extraordinary government support, which is no longer factored into the rating.

'The rating reflects Marfa's vulnerable liquidity position, very aggressive financial policy, strong competition in the Romanian transport sector, the company's aged and obsolete rolling stock, and an inflexible cost structure that aggravates operational risk,' S&P said.

It added these risks are somewhat mitigated by Marfa's strong -- albeit weakening -- market position, continued transportation market growth fueled by the Romanian economy's expansion, and strong cash flow protection for the rating.

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