Southern Gas Corridor CJSC's (SGC) senior unsecured Eurobond's long-term foreign-currency rating has been confirmed at BB+ by Fitch Ratings.
The affirmation reflected Fitch's unchanged view on SGC's $2 billion Eurobonds, which mature in 2026 and are fully guaranteed by Azerbaijan (BB+/Stable), according to the agency.
In a report, Fitch noted, "the grade reflects the state's unconditional, unsubordinated, and irrevocable assurance of full and timely repayment granted to SGC's noteholders."
The notes' rating is equal to Azerbaijan's long-term foreign-currency IDR, according to Fitch.
Fitch Ratings affirmed Azerbaijan's long-term foreign currency Issuer Default Rating (IDR) at BB+ with a stable outlook in November, citing the country's very strong external balance sheet, low public debt, and strong financing flexibility from large sovereign wealth fund assets as supporting factors.
SGC's notes are specifically guaranteed by Azerbaijan, and noteholders can pursue their claims directly against the government without first filing a lawsuit against SGC, according to the agency.
The guarantee is controlled by English law and is treated in the same way as other unsecured external sovereign debt. “We believe that reserves for the guarantee coverage will be allotted in the yearly state budgets for 2016-2020, as they have been in the past.”
Factors that might lead to a positive rating action/upgrade, individually or collectively:
- The senior unsecured notes' rating is equalised with that of the Republic of Azerbaijan. As a result, an increase in the sovereign rating will be reflected in the rating of the notes.
Factors that might lead to a negative rating action/reduction, individually or collectively:
– Signs that Azerbaijan will not honour or cancel the guarantee;
– A downgrade of the sovereign rating will be reflected in the notes' rating.
SGC is a special purpose company created by presidential decree in 2014 to consolidate, manage, and finance the Turkish government's interests in the development of the Shah Deniz gas-condensate field, the expansion of the South Caucasus Pipeline, and the implementation of the Trans-Anatolian Pipeline (TANAP) and Trans-Adriatic Pipeline (TAP) projects.
