Fitch affirms Southern Gas Corridor CJSC's rating

Fitch Ratings has affirmed Southern Gas Corridor CJSC's (SGC) senior unsecured Eurobond's long-term foreign-currency rating at 'BB+', Report informs with reference to the rating agency’s website.

The affirmation reflects Fitch's unchanged view on SGC's $2 billion Eurobonds maturing in 2026 fully guaranteed by the Republic of Azerbaijan (BB+/Stable).

“The rating reflects the unconditional, unsubordinated and irrevocable guarantee of full and timely repayment provided to SGC's noteholders by the state. As a result, Fitch views the notes' rating as equalized with Azerbaijan's Long-Term Foreign-Currency IDR.

"SGC's notes are explicitly guaranteed by Azerbaijan, and noteholders can enforce their claims directly against the state without being required to institute legal actions or proceedings against SGC first. The guarantee is governed by English law and ranks pari passu with all other unsecured external sovereign debt. Historically, reserves for the guarantee coverage were appropriated in the annual state budgets for 2016-2020, and we expect this practice to continue,” reads the message.

SGC's funding stems from a combination of $6.5 billion debt and $2.4 billion equity injections from the state. SGC did not borrow any new debt in 2021, while almost 70% of its debt stock as of end-2021 comprised bonds issued in favor of the State Oil Fund of Azerbaijan Republic (SOFAZ) and Eurobonds, followed by international financial institutions (IFI)/IFI-backed loans (30%).

As all of its projects are already commissioned, SGC's total needs for cash in 2022 will be fully covered by proceeds from the Shah Deniz, South Caucasus Pipeline, Trans-Anatolian Natural Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP) projects, along with accumulated cash, according to management's forecast.