S&P gives Russian Railways loan BBB

Standard & Poor's said it assigned its BBB senior secured issue rating to the $1.5 billion limited recourse loan participation notes issued by the special purpose vehicle RZD Capital Ltd.

The issue is for the sole purpose of financing a loan to Russian Railways (JSC) (BBB/stable; Russia national-scale rating ruAAA) as borrower through a loan agreement.

According to the agency, the notes are due on April 3, 2017 and have a coupon of 5.739% per year.

The agency added that it equalized the ratings on the bonds with the credit ratings on RZD because, in its view, the structure allows the noteholders to rely exclusively on RZD to service and repay the debt in full on a timely basis and in dollars.

S&P noted that it also factored in RZD Capital's restricted object; its benefit from gross-up clauses, enabling pass-through of its ongoing, financial, and tax expenses to RZD, including Russian withholding tax should the relief of the "double taxation treaty between Russia and Ireland" as of April 4, 2004, not be available; and its view that it generally complies with its bankruptcy-remoteness criteria.

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