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S&P keeps MÁV 'B+' rating on watch

Standard and Poor's Ratings Services said it decided to keep state-owned Hungarian railway company MÁV's 'B+' long-term corporate credit rating on CreditWatch because the government's strategy for MÁV was still unclear.

“The decision to maintain the long-term rating on CreditWatch--despite the recent favorable news about MÁV's receipt of a cost reimbursement from the Hungarian government--mainly reflects our continued lack of visibility on the government's future strategy for MÁV,” said Standard and Poor's credit analyst Juliana Gallo. “We still require clarification on the implementation of the rail network management contract between MÁV and the government, as well as on the likelihood of any forthcoming measures to improve the sustainability of MÁV's liquidity position and capital structure,” she added.

“The long-term 'B+' corporate credit rating under review reflects our opinion that there is currently a very high likelihood that the Republic of Hungary would provide timely and sufficient extraordinary support to MÁV in the event of financial distress,” S&P said.

S&P assessed MÁV's stand-alone credit profile at 'ccc+'.

MÁV's rating could come under pressure if the network management contract with the government is more difficult than expected, increasing the company's reliance on working capital loans even further or if the extraordinary level of state support for the company weakens, S&P said. It could raise the rating if the company's weak liquidity position strengthens, the network management contract is implemented and the company's overall stand-alone credit profile improves.

MÁV's rating was placed on watch on May 27, 2010.

S&P said it kept MÁV's short-term rating unchanged at 'B'.

S&P will review the CreditWatch listing in the next three months. (MTI – Econews)