Fitch rates X5 Retail bonds BB-

Fitch Ratings said it assigned a senior unsecured rating of BB- with recovery rating of RR5 to X5 Finance LLC's recently issued RUB 5 billion bonds, along with a national senior unsecured rating of A+(rus).

X5 Finance LLC is a fully consolidated non-operating subsidiary of X5 Retail Group NV.

Similar to other bonds issued by X5 Finance, the new bond only features a suretyship from the holding company, X5, the agency explained.

Therefore, Fitch said it views these bonds structurally subordinated to other senior unsecured obligations of the group, which are represented by bank debt at the level of operating companies.

The agency also said it rates the bond one notch less than X5's long-term local-currency BB issuer default rating as prior-ranking debt is estimated at 2x of group EBITDA in the 12 months ending June 2016.

Based on the current forecasts, Fitch said it expects the ratio to be at or more than 2x by the end of 2016 and X5's debt mix to remain unchanged over the medium term.

The ratings also consider X5's strong market position as the second-largest food retailer in Russia, the agency said.

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