The 'A' rating indicates that OJSC Railways of Yakutia qualifies as a highly creditworthy borrower. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.

OJSC Railways of Yakutia is a public-use federal railway infrastructure company whose fixed assets are valued at over RUB 22 billion. The company has its own operational park of main-line and shunting diesel locomotives. The company owns the Berkakit-Tommot rail line and operates the 360 km long Neryungri Cargo – Aldan – Tommot railway section providing cargo and passenger transportation services. 14 stations and passing loops are directly connected to the general network of JSC Russian Railways. Among them, the Neryungri-Cargo, Chulman, Aldan, Kuranakh, Tommot stations and the Tenisty, Chulbass, Denisovsky passing loops perform cargo handling and commercial operations.

We regard act the improving KPIs, the low debt burden and the acceptable margin of financial safety as the main positive rating drivers for OJSC Railways of Yakutia.

Over the period analyzed, assets of OJSC Railways of Yakutia were on a steady growth trend. At the end of the first half of 2014, they reached a five-year peak of RUB 24,891 million.

The Company's EBITDA totaled RUB 365 million, its share in the corporate revenues increased from 12.35% to 13.95% for the first half of 2014, an evidence of the growing operational efficiency of OJSC Railways of Yakutia.

The capital structure of OJSC Railways of Yakutia is dominated by equity capital (87.5% end of the first half of 2014). Accordingly, the equity to total assets ratio of OJSC Railways of Yakutia is far above the generally recommended minimum level, while the share of total liabilities in the capital is rather insignificant.

The loan debt to annual revenue ratio of OJSC Railways of Yakutia is fairly low, which we believe to be a positive credit rating argument. At the end of H1 2014, Railways of Yakutia's loan debt to annual revenue was ca. 36%.

At the beginning of the third quarter of 2014, Railways of Yakutia's interest coverage ratio was 1.3, an evidence of the Company's obvious ability to meet its loan interest payment obligations without much strain.

The acceptable level of financial safety also contributes to the Company's creditworthiness. Railways of Yakutia's margin of financial safety at the beginning of the third quarter 2014 was 0.90.

OJSC Railways of Yakutia benefits from a low loan debt, a mere 4.3% of its equity capital.

At the same time, the weak liquidity position and the continuing growth of loan debt are working against the credit rating of OJSC Railways of Yakutia.

The liquidity position of OJSC Railways of Yakutia has been steadily weakening for the last five years. At the beginning of Q3 2014, its current liquidity ratio decreased to 0.536, absolute liquidity ratio to 0.001.

The continuing growth of loan debt is also constraining the credit rating. In early third quarter of 2014, it reached RUB 945 million.

Company name: OJSC Railways of Yakutia.

This press release is based on the Statement of assignment of a credit rating to OJSC Railways of Yakutia.

The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

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