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Rating Action:

Moody's downgrades ratings of three issuers in Ukraine to Caa3; negative outlook

26 Mar 2015

Action follows downgrade of Ukraine's sovereign rating and lowering of foreign-currency bond ceiling

London, 26 March 2015 -- Moody's Investors Service has today downgraded to Caa3 from Caa2 the corporate family ratings (CFRs) and to Caa3-PD from Caa2-PD the probability of default ratings (PDRs) of three companies operating in Ukraine (Ferrexpo Plc, Metinvest B.V. and MHP S.A.).

The rating action follows Moody's decision (on 24 March 2015) to (1) downgrade the Government of Ukraine's sovereign (government bond) rating to Ca from Caa3 with a negative outlook, and (2) lower the country's foreign-currency bond country ceiling to Caa3 from Caa2. For additional information on sovereign ratings, please refer to the webpage containing Moody's related announcement https://www.moodys.com/research/--PR_320764.

Concurrently, Moody's has downgraded the national scale corporate family ratings (NSR) of Metinvest to Caa3.ua from B1.ua and MHP to Caa2.ua from B2.ua. In addition, Moody's has downgraded the ratings on the senior unsecured notes and the MTN programme issued by Metinvest B.V. to Caa3/(P)Caa3 from Caa2/(P)Caa2, and downgraded the senior unsecured notes issued by Ferrexpo Finance plc and MHP S.A. to Caa3 from Caa2. The outlook on all the ratings is negative.

RATINGS RATIONALE

Today's action primarily reflects the constraints of Ukraine's lower foreign currency ceiling on the ratings of the affected companies. The three issuers are directly exposed to Ukraine's political, legal, fiscal and regulatory environment, given that most or all of their assets are located within the country and because their debt is mostly in foreign currency.

The companies' capacity to service their foreign currency debts could be negatively affected by the potential actions taken by the Ukrainian government to preserve the country's foreign-exchange reserves. In addition, the companies' revenues and cash flows generated in the country are exposed to foreign-currency transfer and convertibility risks, which are reflected in the Caa3 foreign-currency bond country ceiling for Ukraine.

RATIONALE FOR NEGATIVE OUTLOOK

The negative outlook is in line with the negative outlook for the sovereign rating and reflects the fact that a potential further downgrade of Ukraine's sovereign rating may result in the further lowering of Ukraine's foreign- and/or local-currency bond country ceiling, which in turn will lead to downgrades of the three rated issuers. In addition to considerations related to the sovereign rating, Moody's will also be monitoring the companies' individual ability to address increasing country and foreign-exchange risks.

WHAT COULD CHANGE THE RATINGS UP/DOWN

The companies' ratings will be ultimately dependent on further developments at the sovereign level. The ratings are likely to be downgraded if there is a further downgrade of Ukraine's sovereign rating and/or lowering of the foreign-currency bond country ceiling.

Conversely, positive pressure could be exerted on the ratings if Moody's were to raise Ukraine's foreign-currency bond country ceiling, provided there is no material deterioration in the company-specific factors, including their operating and financial performance, market positions and liquidity.

PRINCIPAL METHODOLOGIES

The principal methodology used in rating Metinvest B.V. was Global Steel Industry published in October 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

The principal methodology used in rating MHP S.A. was Global Protein and Agriculture Industry published in May 2013. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

The principal methodology used in rating Ferrexpo Plc and Ferrexpo Finance plc was Global Mining Industry published in August 2014. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Moody's National Scale Credit Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale credit ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".za" for South Africa. For further information on Moody's approach to national scale credit ratings, please refer to Moody's Credit rating Methodology published in June 2014 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".

Metinvest B.V., registered in the Netherlands, is the holding company of a vertically integrated group, Metinvest, which is one of the largest steelmakers and iron ore producers in the Commonwealth of Independent States (CIS). The company produces finished flat- and long-steel products, large diameter pipes and semi-finished steel products (slabs and billets), pig iron and coke products, iron ore and coking coal concentrate as well as pellets. In the first nine months of 2014, Metinvest produced approximately 7.5 mt (2013: 9.4 mt) of crude steel, and 26.5 mt (2013: 27.7 mt) of iron ore concentrate, and 3.3mt (2013: 4.4 mt) of coking coal concentrate. In the first nine months of 2014, Metinvest reported revenue of $8.5 billion (2013: $9.8 billion) and EBITDA of $2.0 billion (2013: $1.8 billion). The company is privately owned, with the major shareholders of the group being a Ukrainian investment holding company, System Capital Management (SCM), which has a 71.24% share in Metinvest, and Smart group, which owns 23.76%.

MHP S.A., domiciled in Luxembourg, is one of Ukraine's leading agro-industrial groups. The company's operations include the production of poultry and sunflower oil, as well as the production and sale of convenience foods. In addition, MHP is vertically integrated into grain and fodder production, and operates one of the largest land banks in Ukraine. As of the 12 months ended September 2014, the company's dollar-denominated total revenue and adjusted EBITDA amounted to around $1.5 billion and $537 million, respectively.

Ferrexpo Plc, headquartered in Switzerland and incorporated in the UK, is a mid-sized iron ore pellet producer with mining and processing assets located in Ukraine. The group has total Joint Ore Reserves Committee Code (JORC) classified resources of 6.7 billion tonnes, around 1.5 billion tonnes of which are proved and probable reserves. The average grade of Ferrexpo's ore is approximately 31% Fe. In 2014 the group achieved a pellet production of 11 million and generated revenues of $1.39 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Denis Perevezentsev
Vice President - Senior Analyst
Corporate Finance Group
Moody's Interfax Rating Agency
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JOURNALISTS: 44 20 7772 5456
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Victoria Maisuradze
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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Moody's downgrades ratings of three issuers in Ukraine to Caa3; negative outlook
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