Moody's downgrades ENRC's CFR rating and puts all ratings under review

Ratings agency Moody's on Thursday downgraded the corporate family rating (CFR) of Eurasian Natural Resources Corp. (ENRC) from B1 to Ba3 and has placed all ratings under review for further downgrade, reflecting the agency's concerns about 'recent corporate governance related developments'.

Ratings agency Moody's on Thursday downgraded the corporate family rating (CFR) of Eurasian Natural Resources Corp. (ENRC) from B1 to Ba3 and has placed all ratings under review for further downgrade, reflecting the agency's concerns about 'recent corporate governance related developments'.

A formal investigation into the company governance, including potentially fraudulent payments of at least $100m over four years, has been launched by the Serious Fraud Office (SFO). The company said Thursday it is 'assisting and cooperating fully' with the SFO.

Moody's downgrade was also based on what Moody's sees as the continued 'uncertainty' created by a possible takeover bid by the founding shareholders, which has consequently exposed the company to risks which had not been factored into the previous rating.

These included "greater difficulty accessing the credit and capital markets, more aggressive financial policies, loss of key personnel and a lessened commitment to the higher standards of corporate governance and transparency that were a key priority of the former Chairman", the agency said.

Moody's also downgraded ENRC's probability of default rating (PDR) to B1-PD from Ba3-PD, and consequently its provisional rating on ENRC's $3.0bn euro medium-term note (EMTN) programme to (P)B1 (LGD4, 54%).

Gianmarco Migliavacca, a Moody's Vice President - Senior Analyst and lead analyst for ENRC, said: "We have downgraded ENRC's CFR to B1 and placed its ratings on review for further downgrade because the turmoil at the board and senior management level, culminating with the recent resignation of the Chairman, in conjunction with ongoing investigations overseen by the UK Serious Fraud Office (SFO) and a possible bid by the founding shareholders to take the company private, are leading to new degrees of uncertainty and unpredictability over the future direction of the company, its financial policies and governance which are no longer in line with the previous Ba3 rating."

The agency also said that the downgrade reflects its view that ENRC's credit metrics and liquidity are "no longer commensurate with its previous Ba rating category, and are unlikely to sustainably improve in the next 12 to 18 months".

The rating review will focus on the assessment of any progress on the internal investigations regarding allegations of fraud committed by ENRC in Kazakhstan and the DRC, any further material developments regarding the company's corporate governance, as well as the terms of the possible tender offer that founding shareholders may launch in the coming weeks, and the main effects of this for the company and its investors.

Recommended

Best junior stocks and shares ISA platforms
Isas

Best junior stocks and shares ISA platforms

A junior stocks and shares ISA is a great way to save for your child tax-efficiently. But it can be confusing deciding which investment platform to ch…
25 Nov 2022
Share tips of the week – 25 November
Share tips

Share tips of the week – 25 November

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
25 Nov 2022
Investing in a recession: 5 moves investors should make now
Investment strategy

Investing in a recession: 5 moves investors should make now

As we enter a recession, here’s what investors should do with their portfolios.
23 Nov 2022
It’s time to focus on Fuller’s
Share tips

It’s time to focus on Fuller’s

The pub sector has had a torrid two years, but this group is resilient and poised to prosper. We take a closer look at Fuller’s.
21 Nov 2022

Most Popular

Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Wood-burning stove vs central heating ‒ which is cheapest?
Personal finance

Wood-burning stove vs central heating ‒ which is cheapest?

Demand for wood-burning stoves has surged as households try to reduce their heating costs this winter. But how does a wood burner compare with central…
29 Nov 2022
Best regular savings accounts – November 2022
Savings

Best regular savings accounts – November 2022

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
29 Nov 2022