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14.03.2008 - MDM Comment: MIRAX restructuring may have mixed credit implications

MIRAX (B2/NR/B) restructuring may have mixed credit implications
MIRAX said yesterday it had completed its restructuring process, which, according to a company press-release, is aimed at improving transparency and easing access to capital markets. The restructuring essentially entailed moving all the company’s key assets from Russia based Mirax Group LLC to a new holding company, Mirax Group Holding BV, incorporated in Holland. MIRAX said that the former holding company (Mirax Group LLC) will become one of the sub-holdings. The company also stated that it will initiate rating procedures with regard to Mirax Group Holding BV.
In fact, the restructuring should come as no surprise to the holders of Mirax 11_09 CLN, as the company had discussed these plans on its pre-issuance marketing trips.
While we do not rule out longer-term positives derived from the restructuring (this may be part of pre-IPO homework, as was in case with some other Russian companies moving holding companies to Holland), we would like to draw attention to potential short-term negative credit implications. If the new holding company does not guarantee the former holding company’s liabilities, one may argue that this would reduce the credit protection on debt issued or guaranteed by Mirax Group LLC (this entity is the issuer of the company's ruble bonds and one of the guarantors on the CLN issue). That in turn may theoretically threaten the company's credit ratings, since they are currently assigned to Mirax Group LLC.
Key questions that have not as yet been clarified are whether MIRAX will provide a guarantee from Mirax Group Holding BV to Mirax Group LLC, and whether the old ratings will be kept or withdrawn. Once we get the answers to these questions, we should be able to better assess the implications of restructuring for the bondholders.

14.03.2008 15:01
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