PRESS RELEASE: S&P Lifts Ferrexpo L-T FC Rtg To 'B+' On Sov Action; Otlk Stbl

30th Jul 2010 14:58

The following is a press release from Standard & Poor's: -- On July 29, 2010, we raised our long-term foreign currency rating and our transfer and convertibility assessment on Ukraine to 'B+'. -- We are consequently raising our long-term foreign currency rating on Ukraine-based iron ore producer Ferrexpo PLC to 'B+' from 'B' and removing it from CreditWatch with positive implications. -- We are affirming the 'B+' long-term local currency and 'B' foreign and local currency short-term corporate credit ratings on Ferrexpo. -- The stable outlook reflects our view that Ferrexpo will be able to maintain credit metrics commensurate with the ratings. LONDON (Standard & Poor's) July 30, 2010--Standard & Poor's Ratings Services said today that it had raised its long-term foreign currency rating on Ukraine-based iron ore producer Ferrexpo PLC to 'B+' and removed it from CreditWatch with positive implications, where it had been placed on July 23, 2010. At the same time, the 'B+' long-term local currency and 'B' foreign and local currency short-term corporate credit ratings on Ferrexpo were affirmed. The outlook is stable. "The rating action follows a similar action we took on the sovereign on July 29, 2010," said Standard & Poor's credit analyst Alex Herbert. For further details, see "Ukraine Long-Term Sovereign Foreign-Currency Ratings Raised To 'B+' On IMF Program; Off Watch Pos; Outlook Stable," published July 29, 2010, on RatingsDirect. The ratings on Ferrexpo reflect our opinion of the group's weak business risk profile and aggressive financial risk profile. Supporting factors include the midcost position of the group's mining operations, long reserve life, proximity to European steel markets, and attractive industry characteristics. Furthermore, the group is focused on exports, and profitability is healthy. In addition, in our view, Ferrexpo has a moderate financial policy and limited leverage, which provides it with the financial flexibility to execute its growth strategy. Constraining factors include increased volatility in iron ore prices, industry cost pressures, and capital intensity. Furthermore, Ferrexpo has a narrow diversity of operations in our view. The group's assets are all located in Ukraine, where country risks--including a very weak banking sector, political instability, and delays in value-added tax receipts--are a constraint, although in our opinion, Ferrexpo manages these risks adequately. The stable outlook reflects our view that Ferrexpo will be able to maintain credit metrics commensurate with the ratings. In our credit scenario, we assume that high iron ore prices will moderate over time, and that capital expenditures will rise as the group invests in and develops its operations. We nevertheless envisage moderate leverage and satisfactory credit metrics, and consider ratios of funds from operations to adjusted debt of 30% and adjusted debt to EBITDA of 2.5x to be in line with the ratings. "Further ratings upside for the ratings on Ferrexpo is constrained by our view of the risks of its limited diversification--in particular, Ukraine country risks, where the group's operations are located; volatile iron ore prices; and capital intensity," said Mr. Herbert. We do not anticipate downward rating pressure, but this could develop if, for example, there was a sharp downturn in iron ore prices at a time when the group was undertaking significant capital expenditures, leading to weaker credit ratios than indicated. We do not factor in debt-financed acquisitions. RELATED CRITERIA AND RESEARCH -- Ukraine-Based Mining Group Ferrexpo PLC Assigned 'B' (Foreign Currency) 'B+' (Local Currency) Ratings; Outlook Stable, June 30, 2010, -- Key Credit Factors: Methodology And Assumptions On Risks In The Mining Industry, June 23, 2009 -- Principles Of Corporate And Government Ratings, June 26, 2007 Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4011. Primary Credit Analyst: Alex Herbert, London (44) 20-7176-3616; [email protected] Secondary Credit Analyst: Andrey Nikolaev, CFA, Moscow (7) 495-783-4131; [email protected] Additional Contact: Industrial Ratings Europe; [email protected] No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. 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