“COVID-19” impact: Fitch Ratings demotes Rusal to 'B+'; Outlook remains Stable

Fitch Ratings has demoted Russian-based aluminium company United company RUSAL Plc's (Rusal) Long-Term Issuer Default Rating (IDR) to 'B+' from 'BB-'. The agency has also downgraded Rusal Capital D.A.C.'s senior unsecured notes rating to 'B+' from 'BB-'. The Outlook on Long-Term IDR remains Stable.

The moment Rusal entered the COVID-19 pandemic and that in return received a global downturn with high leverage that makes it more susceptible to external shocks. Its debt burden has been high since the purchase of the NN stake in 2008 without meaningful debt reduction over the last three years.

The downgrade reflected the expectation of a further delay in deleveraging with funds from operations (FFO) gross and net leverage remaining materially above our previous negative sensitivities of 3.5x (2019: 4.7x) and 3.0x (3.7x), respectively, at least until 2022. It also mirrored prolonged low commodity prices, along with a collapse in aluminium demand and uncertainties around the length of the coronavirus pandemic and the shape of the recovery thereafter that will keep the company's margins under pressure.

Fitch expects aluminium end-user demand from automotive and construction that has been already facing difficulties in 2019, to deteriorate from considerably lower economic activity amid the pandemic.

The Stable Outlook on Rusal is underpinned by its strong liquidity of around USD1.8 billion at end-2019, which is enough to cover 2020 and 2021 debt maturities; forecast improvement in credit metrics.

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