(The following statement was released by the rating agency)
Standard & Poor's Ratings Services said today that its ratings on Russian steelmaker OAO Severstal are not affected by the company's plans to spin off its gold division, Nord Gold N.V.
We expect the spin-off to be broadly neutral for Severstal's financials, and marginally negative from a business perspective. We estimate that pro forma Nord Gold deconsolidation, Severstal's adjusted ratio of debt to EBITDA in the first half 2011 would move from 1.2x to 1.3x, which we view as very comfortable for the rating. Although lower business diversity is marginally negative, our assessment of Severstal is mainly based on its core steelmaking, coal, and iron ore mining business.
Nord Gold is relatively small compared with Severstal's core business, responsible for about 13% of the group's EBITDA in the first half of 2011, but has large capital-expenditure needs to develop its asset base and increase production volume. The reduction in EBITDA from Nord Gold should therefore be offset by the reduction in the group's capital-expenditure plans and expected deconsolidation of Nord Gold's debt ($393 million at year-end 2010, of which about $274 million was due to the parent).