Fitch Ratings has affirmed JSC Georgian Railway's (GR) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB-' with Stable Outlooks. A full list of rating actions is at the end of this commentary.
The affirmation reflects Fitch's expectations that GR's link with the government will remain unchanged, while its debt metrics will commensurate with its Standalone Credit Profile (SCP) assessment at 'b+', leading to a single-notch differential of GR's IDR with Georgia's sovereign IDR (BB/Stable).
According to Fitch Ratings, the state exercises adequate control and oversight over GR's activities both directly and via state owned investment fund JSC Partnership Fund (PF), including approval of the railway company's budgets and investments. PF acts as an arm of the state, by approving GR's major transactions (borrowings, investment programme, etc.). GR's supervisory board is nominated and controlled by the government, while goods and services are tendered in accordance with public procurement law.
"In our view, a default of GR may lead to some service disruptions, but not of an irreparable nature, and may not necessarily lead to significant political and social repercussions for Georgia's government. In this case, the company's hard assets will likely remain operational with availability of alternative modes of transportation. However, a default would hamper the company's capital modernisation programme, as GR could continue to rely on market borrowings to fund its future investment programmes.
In light of the globalisation process and due to Georgia's location, the country's economic development is directly related to the proper and effective functioning of the transport sector. GR plays a critical role in enabling Georgia's transit potential and maintaining strong economic relations between Georgia and neighbouring countries", - the document reads.
