Fitch: Russian property development companies strained

Fitch Ratings said it said Russian property development companies are likely to be amongst the worst-hit by a deteriorating financing environment.

This is because of a large share of short-term debt in their liquidity profiles, their often significant operational cash outflows, limited cash-on-balance sheet and a virtual absence of meaningful committed un-drawn facility headroom, the agency said.

"At a time when the Russian government has had to intervene to support domestic financial institutions and with increasing question marks over the ability and appetite of all but the largest Russian domestic banks to maintain current funding levels to the real estate sector, liquidity risks associated with Russian property developers have never been higher," said Julian Crush, senior director in Fitch's corporates team.

Fitch added that its rated universe of Russian property developers comprises five top-tier companies divided into two broad groups (1) residential-focused "build and sell" developers (OJSC PIK Group (BB-/rating watch negative), OJSC LSR Group (B+/outlook stable) and JSC OPIN (B/outlook positive) for which the pre-sales business model allows cash to be recycled back into the business relatively quickly and (2) commercial property-focused "build and hold" developers which tend to tie up cash in the business for longer (Sistema-Hals JSC (B+/outlook negative) and Mirax Group LLC (B/ rating watch negative).

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