We assess credit quality of parent company UzAuto Sanoat as in line with that of UAM. We
assess the group credit profile of UzAuto Sanoat, which owns 100% of UAM, as being at the same
level as UAM's stand-alone credit profile. The group continues to benefit from its quasi-regulation
function, controlling auto manufacturing enterprises and auto localization, and from
diversification into other segments such as heavy trucks and engines as well as components
production. However, additional debt of $180 million-$200 million to finance capex at other
subsidiaries and UAM's contribution of about 70% to the group's EBITDA, limit headroom for
potential group support. Moreover, we expect no new major projects at the parent company until
the GEM platform is fully ramped up.
UAM's plans for an IPO of a minority stake is unlikely to change our view of its link with the
government. The company plans an IPO in Uzbekistan in the second half of 2022 of up to 5% of
its capital is subject to government approval. We regard as positive that the government will keep
a controlling stake in the company, which supports our view that the likelihood of UAM receiving
extraordinary government support won't change. Moreover, the potential entry of international
investors could further enhance transparency and the implementation of best corporate
practices. We still believe our assessment of a high likelihood of extraordinary government
support captures the group's importance to the local economy as a national auto producer and
large employer, as well as the government's influence on UAM's strategic and business plan
through its board of directors, and its track record of previous support through favorable loan
rates and market regulation.
Outlook
The stable outlook reflects our view that UAM will generate materially higher revenue, while
negative FOCF of $100 million-$150 million in 2022 will be covered by the company's cash balance
of $330 million. We further expect that the remaining capital investments for the GEM platform
will be covered with ECA funding during the first half of 2022. We also expect the company to
report an S&P Global Ratings-adjusted FFO to debt ratio of at least 35% in 2022 and repay the
outstanding facility with Credit Suisse.
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