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30.01.2008 - MDM Comment: EBC to set up a JV with a global leader

European Bearing Corporation (the issuer of EPKRU 09 CLN) said that it agreed to set up a joint-venture with US-based Brenco - a leading producer of bearings for the rail industry. EBC is expected to contribute one of its plants (the recently acquired Saratov Bearing Plant) in the JV, while Brenco will delegate some cash and technologies. Total investments into JV are expected to reach USD70m.
We view the news as positive for EBC's long-term credit perspectives. Alliance with a global leader should help EBC address one of its key competitive weaknesses - lower product quality vs foreign producers of bearings, and in this way preserve the still significant market share in Russia.
As we understand, EBC is about to successfully complete the procedure related to the waiver and adjustment of its Debt/EBITDA covenant in the CLN documentation. EBC was not in compliance with the initial covenant based on the 2006 IFRS results.
EPKRU 09 issue is currently offered at 97.0, which corresponds to a yield of 14.2% to a put in Oct 08.

20.02.2008 15:59