S&P: OMZ view negative

Standard & Poor's said it revised the implications of the CreditWatch status of its CCC+ long-term corporate credit rating on Russia-based capital goods company OAO OMZ (Uralmash-Izhora Group) to negative from developing following liquidity concerns and the cancellation of the company's merger with the Russian power-generation equipment producer Power Machines OJSC.

At the same time, S&P lowered its Russia national scale corporate credit and senior secured debt ratings on OMZ to ruBB from ruBBB-.

"The rating actions reflect the company's significantly impaired liquidity and Standard & Poor's concerns that OMZ's business and financial position could be damaged after the merger cancellation, as all the company's actions over the past period are likely to have been done bearing the interests of the merged company in mind, including strategic priorities in terms of acquisitions, disposals, and financial policies," said S&P credit analyst Tatiana Kordyukova.

Among other things, the company started to divest its divisions, which were recognized as non-core under the new strategy of the merged company. At the same time, the group acquired the nuclear equipment, steel, and machinery divisions from Skoda, the financial positions of which cause additional concerns. Furthermore, operating control over OMZ was transferred to Power Machine's management and at the moment OMZ's new management structure and its strategy is unclear.

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