07.10.2008 - MDM Comment: Eurokommertz (B2) management reduced its stake in the company

Eurokommertz (B2) management reduced its stake in the company

The management of Russian factoring company Eurokommerz has reduced its stake in the company to 45.5% by selling a 4.2% stake to a consortium of investors led by Troika Capital Partners, Eurokommerz said Monday. The consortium includes UBS Pactual, Eastgate Capital (part of NCB Group), Fleming Family & Partners, Troika Dialog, and other institutional investors. Financial details were not disclosed.

We perceive the news as credit-neutral, given the fact that the company’s balance sheet is not affected.

On a separate note, we are somewhat concerned that the asset quality of Eurokommertz may be deteriorating now. The company is very often lending against receivables due from Russian retail chains. The retail sector is now one of the most vulnerable in terms of credit quality and payment discipline.

Eurokommertz appears to be a decently capitalized company with short-term asset structure (very helpful in current conditions) and wide margins. The company is rated B2 by Moody’s. In our view, key weaknesses of Eurokommertz credit profile include high growth rates, unclear asset quality, significant reliance on wholesale capital markets and the fact that core equity capital is located at the holdco level, which is not part of structure in RUB bonds of Eurokommertz. The bonds are not very liquid and often trading at distressed levels, as many other Russian bonds do these days. Eurokommertz has been recently reporting about successful refinancing of some RUB11 billion in securitization deals.

07.10.2008 16:45