Rouble pressures on Russian corporates

The recent decline in the value of the Russian rouble could exert pressure on the ability of Russian non-financial corporate issuers to service debt, Moody's Investors Service said in a new special comment
Since August 2008, the rouble which once benefited from high oil prices and a booming Russian economy, has dropped by more than 30% against the US dollar, driven by the global credit crisis and a 75% decline in oil prices within the last six months of 2008.
"While this trend could be beneficial for some Russian non-financial corporate issuers rated by Moody's, particularly those active in export-oriented industries, the pressure on others will rise as the rouble continues to fall," said Sabine Renner, an analyst in Moody's Credit Policy and author of the report.
"The currency footprint of the issuers' revenues, costs and debt structures will determine the impact on their profitability, cash flow generation and debt service capacity." Moody's believes the latter could especially be tested as a result of a major currency mismatch in cash flows and debt service requirements.
Moody's also recognises that the limited foreign currency-denominated liquidity in international markets and tightened local funding will affect the ability of Russian corporate issuers to refinance foreign currency debt. "Consequently, the ability of an issuer to refinance its foreign currency-denominated debt will be a key factor in determining any future rating actions taken by Moody's," said Renner.