Standard & Poor's last week upgraded the class A notes of a Russian leasing deal to 'BBB+' after it did the same to the long-term corporate rating of the transaction's lessee, Russian Railways. Dubbed Red Arrow International Leasing, the transaction consists of a six-year final, RUR12.6 billion ($475 million) senior tranche initially rated 'BBB-'.
Moody's Investors Service rated the deal 'Baa2' at issuance, a grade that remains the same and has consistently been two rungs below the agency's local currency rating on the Railways, 'A3'.
Morgan Stanley and CIT Finance Investment Bank led the deal, which included unrated subordinated notes for a total RUR46.7 billion.
S&P's move was prompted by its new assessment of the Russian government's relationship with specified companies. The higher ratings reflect "increased probability that the Russian government will support the company in case of financial distress," the agency said in a release. Russian Railways is a state-owned company and the country's railway monopoly.
When it closed, Red Arrow was touted as the first securitization of lease receivables from Russia. A second deal in the asset class has yet to come to market, according to ASR's records.