NEW YORK (S&P Global Ratings) March 11, 2022--S&P Global Ratings said today that, following its downgrade of Russia on March 3, 2022, it has lowered its long- and short-term issuer credit ratings on the following finance companies exposed to Russia and kept them on CreditWatch (see ratings list below):

• Credit Union Payment Center to CCC+/Watch Dev/C from BB+/Watch Neg/B;
• First Client Bureau NPJSC to CCC-/Watch Neg/-- from B/Watch Neg/--; and
• QIWI PLC to CCC-/Watch Neg/C from BB-/Watch Neg/B.

The downgrades follow the lowering of our foreign currency sovereign credit ratings on Russia to 'CCC-/C' from 'BB+/B' and the local currency ratings to 'CCC-/C' from 'BBB-/A-3'; all the sovereign ratings remain on CreditWatch negative. We also revised down our transfer and convertibility assessment on Russia to 'CCC-' from 'BBB-' (see "Russia Ratings Lowered To 'CCC-' And Kept On CreditWatch Negative On Increasing Risk Of Default," published March 3, 2022, on RatingsDirect).

There are significant pressures on key sectors of the Russian economy, including its financial system, and there has been a sharp deterioration in the operating conditions for non-sovereign entities doing business in Russia. This has been triggered by international sanctions, as well as the capital and currency controls that we understand could constrain companies in Russia from honoring their obligations in full and on time, and other restrictive measures imposed by the Russian authorities.

Credit Union Payment Center (RNKO)

The multi-notch downgrade reflects our view that RNKO could face increasing operational constraints, a deteriorating operating environment, and potential disruptions to settlement obligations. RNKO is a core subsidiary of the wider CFT Group, which specializes in banking software and payment processing services. CFT Group's payment network mainly provides money transfer services in Russia and other countries in the Commonwealth of Independent States (CIS), predominantly for retail clients. We expect that its money transfer transaction flows would be affected by the central bank's new restrictions, for example the $5,000 per person monthly limit on forex payments out of Russia. However, a substantial portion of transaction flows is outside Russia, and many of the flows administered by RNKO may not be hugely affected so far. We acknowledge though that the situation may change rapidly, and this could force RNKO to pare back its service offering to Russia-based clients. The CFT Group has no debts, in line with its long-standing zero-debt policy, and has a substantial cash position. Furthermore, the CFT Group has liquidity outside Russia and we understand that it is ready to honor any settlement obligations that RNKO could be technically unable to meet.

CreditWatch

The ratings are on CreditWatch developing to indicate that we could either lower or raise them over the next few weeks, depending in particular on the business developments for the money transfer business, and our view of RNKO's capacity to continue to settle all transactions in full and on time.

First Collection Bureau (FBC)

The multi-notch downgrade reflects our view that Russia-based bad-debt purchaser FCB could face increasing constraints to meet its short-term financial obligations with foreign investors following capital controls established in Russia. It also reflects potentially negative implications for the business, including its collection ability, should Russia's economic woes weaken borrowers' capacity to pay.

That said, we acknowledge that FCB could put the brakes on new portfolio purchases to minimize the impact on its cash flows. We also understand that FCB is not exposed to foreign-exchange risk because its assets and liabilities are all in local currency. On Dec. 31, 2021, the group had Russian rubles (RUB) 3.1 billion in cash and cash equivalents, close to double its current liabilities on the same date. Its total current assets covered its current liabilities by 5x on Dec. 31, 2021. On the same date, its bond obligations included only bonds issued in local currency (about RUB4 billion). Even though FCB seems to have the financial capacity to meet its obligations currently, we believe that the capital restrictions the Russian authorities have imposed render uncertain FCB's technical ability to make timely debt payments (interest and/or principal) to all creditors and in full.

CreditWatch

The CreditWatch negative status indicates that we could lower the ratings further over the next few weeks. We expect to resolve the CreditWatch once we have more clarity on FCB's technical ability and/or willingness to honor its obligations in full and on time.

Qiwi PLC (Qiwi)

The multi-notch downgrade reflects our view that Qiwi, a Cyprus-based holding company, faces increasing constraints to meet its short-term financial obligations with investors, following deteriorated operating conditions in Russia and the imposition of capital controls. We expect these to have important implications for its key Russia-based payment services subsidiary, Qiwi Bank. The group has a RUB5 billion bond outstanding, issued by Russia-based subsidiary Qiwi Finance LLC, with interest coupon payments denominated and payable in rubles. We do not rate this instrument, but we note that it includes event clauses that could require Qiwi to repurchase the bond. We note also that the holding company relies on dividends being upstreamed from its Russian subsidiaries. These dividends are now subject to capital controls and significant currency devaluation, which might ultimately impair Qiwi PLC's ability to meet its financial obligations.

CreditWatch

The ratings remain on CreditWatch negative to indicate that we could lower them further over the next few weeks. We expect to resolve the CreditWatch once we have more clarity on Qiwi's technical ability and/or willingness to honor its obligations in full and on time.

Related Criteria

• General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
• General Criteria: Group Rating Methodology, July 1, 2019
• Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019
• General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
• Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
• Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013
• General Criteria: Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions, Nov. 19, 2013
• General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities, Nov. 13, 2012
• General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012
• General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

Related Research

• Russian Banks Downgraded To 'CCC-/C'; Ratings Put On CreditWatch Negative, March 7, 2022
• Russia Ratings Lowered To 'CCC-' And Kept On CreditWatch Negative On Increasing Risk Of Default, March 3, 2022
• Four Russian Banks Downgraded After Sovereign; Those And Other Financial Institutions Ratings On CreditWatch Negative, Feb. 28, 2022

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