Baghlan Group downgraded to 'B-'

Baghlan Group downgraded to
# 05 December 2013 09:55 (UTC +04:00)

The outlook is now negative.

The downgrade reflects Baghlan's lack of proactive liquidity management and inadequate risk management and disclosure. In October 2013, Baghlan was technically late on certain payments under its financial indebtedness, in the context of a weak payment culture in Azerbaijan's banking system and unusual liquidity issues during the country's long public holidays. By now all the payments due have been made, together with the late interest paid to Baghlan by the bank, and no event of default or cross-default was triggered. Still, in Agency’s view, it highlights the fact that, in this instance, Baghlan was unable to deal with the weaknesses of the local banking system in a timely manner.

The rating has been removed from CreditWatch because, in Agency’s view, the recently completed sale of the residential property for Azerbaijani manat (AZN) 100 million helps to address short-term liquidity pressures.

The negative outlook reflects potential risks to liquidity, if Baghlan faces further working capital squeezes or weaknesses in the local banking system.

If as a result of these pressures liquidity becomes "weak" under Agency’s criteria, the rating could be lowered.

If, however, Baghlan manages to refinance short-term debt, in the absence of other liquidity pressure or other adverse developments, the Agency could consider revising the outlook to stable.

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