Russian shipowner Fesco has hit back against claims by Fitch Ratings that it risks covenant breaches this year.
The rating agency upgraded the boxship specialist from restricted default (RD) to CCC, suggesting probability of default, on 28 May. However, Fitch said concerns remained over its financial status.
Fesco investor relations department director Dmitriy Ivanov told TradeWinds that the decision saw it move up four investment grades in one go, “which is a very positive fact in itself”.
He added that Fitch was using a different methodology to the company itself.
"Particularly, we do not see real risks of covenants breaches as well as potential lack of liquidity," he said.
"The current financial covenants of the group are in the 'safe zone' and do not break through 4.5 times net Ebitda. The debt is at a market level and is completely manageable."
The shipowner has had an RD rating since 2016.
"Literally, Fitch has recognised that financial stability of Fesco improved significantly in recent years and [the] bonds restructuring process may be considered finalised now."
Ivanov said Fitch took a dimmer view of its outlook than Fesco management, seeing a market decline of 25% this year, rather than 10% as assessed by the company.
Cost-cutting coming
"They do not count ... the available and confirmed credit limits of the company which are sufficient for both financing and capex needs," he said.
He also said that possible operating and investment cost-reduction measures were not considered. These may be implemented during 2020.
"The fact that the consolidated statements of the group do not contain a 'going concern' reservation is not taken into account also," Ivanov said.
Fitch said the upgrade reflected financial flexibility following the restructuring of the company's debt, but weak liquidity, expected covenant breaches and foreign exchange losses remain risks.
Fitch is also expecting Fesco to be hit by weaker demand caused by the coronavirus-related lockdown, with gradual improvements from 2021, when economies reopen and demand returns.
Clarksons lists the owner with 25 ships, including boxships, a bulker and multipurpose vessels.
Currency effects boost Fesco in 2020
Fesco last week revealed a net loss of RUB 1.84bn ($26.4m) for 2019, compared to a profit of RUB 7bn in 2018.
The company blamed this on exchange differences for intra-group liabilities in volatile currency markets.
"The net loss...is a result of exchange rate differences and in fact does not affect the business in any manner," Ivanov said.
"Our consolidated financial statements are prepared in Russian roubles, but within the Fesco Group there are intra-group loans which are nominated in foreign currencies."
With the rise of the rouble last year, there was a negative exchange rate difference and a paper net loss.
However, early in 2020, the Russian currency lost value and this has resulted in a RUB 6bn gain for the company, compensating threefold for last year's loss, Ivanov revealed.
