Fitch gives Hydromashservice bonds B+

Fitch Ratings said it assigned an expected local currency senior unsecured rating of B+(EXP)/RR4 to the prospective RUB 3 billion guaranteed bonds due maturing in 2020 issued by JSC Hydromashservice, a wholly owned subsidiary of JSC HMS Group (B+/stable).

The ratings on the bond reflect the role of Hydromashservice as a principal subsidiary of JSC HMS, and the cross guarantees for debt in the group.

The recovery rating is limited to RR4 as the company's principal operations are in Russia, the agency explained.

Fitch said the ratings reflect HMS' weak business profile, with high geographic concentration and high exposure to investment levels in the Russian oil and gas (O&G) sectors. The ratings are further limited by the agency’s expectation of negative free cash flow (FCF) for the foreseeable future, due to higher capex and continued dividend outflow.

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