London, 01 March 2022 -- Moody's Investors Service ("Moody's") has today taken action on four Ukrainian
corporates. The rating actions follow Moody's decision on 25 February
to place Government of Ukraine's B3 foreign and domestic currency
long-term issuer ratings on review for downgrade. Ukraine's
local- and foreign-currency ceilings remain unchanged at
B2.
Details of the Ukraine sovereign rating action can be found here:
https://www.moodys.com/research/--PR_461633.
Moody's has downgraded to B3 from B2 and placed on review for downgrade
the corporate family ratings (CFRs) of the following companies to reflect
credit linkages with the Ukraine sovereign:
MHP SE (MHP)
B3 CFR, B3-PD probability of default rating (PDR) on review
for downgrade from B2 stable, B2-PD
Baa2.ua national scale rating (NSR) on review for downgrade from
A2.ua
Ferrexpo plc (Ferrexpo)
B3 CFR, B3-PD PDR on review for downgrade from B2 negative,
B2-PD
Metinvest B.V. (Metinvest)
B3 CFR, B3-PD PDR on review for downgrade from B2 stable,
B2-PD
Baa2.ua NSR on review for downgrade from A1.ua
Moody's has placed on review the corporate family ratings (CFRs) of the
following company to reflect credit linkages with the Ukraine sovereign:
DTEK Energy B.V. (DTEK Energy)
Caa3 CFR, Caa3-PD PDR on review for downgrade from Caa3 stable,
Caa3-PD
The outlooks of the above entities have been changed to ratings under
review.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_209009
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
The rating actions on these corporates were triggered by Russia's
(Government of Russia, Baa3 on review for downgrade) further military
operation in Ukraine which started on 24 February 2022. These events
represent a significant further elevation of the geopolitical risks.
An extensive conflict could pose a risk to the Ukraine's government's
liquidity and external positions given the country's sizeable external
maturities in the coming years and the reliance of its economy on foreign-currency
funding.
RATINGS RATIONALE
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
RATIONALE FOR PLACEMENT ON REVIEW
The affected corporates are exposed to Ukraine's political,
legal, fiscal and regulatory environment to varying degrees.
Three of them, namely MHP SE, Ferrexpo plc, Metinvest
B.V. were downgraded to the sovereign rating level from
the country ceiling level, to reflect in particular concerns over
these companies' ability to continue operating uninterruptedly in
the midst of the military conflict and geopolitical crisis in Ukraine,
have access to the necessary infrastructure to enable them to freely export
their goods and meet debt service requirements in the currently extraordinarily
stressed circumstances.
Metinvest announced that it put some equipment of Ilyich Iron and Steel
Works and Azovstal in a suspension mode on 24 February for seven days
until further notice. This decision was made by Metinvest's crisis
response center to ensure the safety of its employees and preserve the
equipment.
MHP put out an update on the effects of the military action on its operations.
Because of the ceased trade channels the company has encountered difficulties
with its supply chain and is currently unable to export any Ukrainian
produce. Inevitably, this is causing the company to incur
significant unplanned losses. MHP has declared that it will not
cease production in order to ensure the National Food Security of Ukraine.
Moody's notes that MHP has sizeable cash reserves that should allow
it to service short-term debt, while the bulk of its debt
payment obligations is deferred until 2024 and beyond when its eurobonds
mature.
Ferrexpo has issued force majeure notices to certain customers given that
the ability to transport via rail and through ports remains unclear.
Ferrexpo also decided to delay the publication date of its 2021 full year
results, which were previously scheduled for 16 March 2022,
given that management attention is focused on the current situation.
However, Ferrexpo is also in a net cash position with only limited
trade financing liabilities outstanding.
DTEK Energy B.V.'s Caa3 rating was placed on review,
reflecting the risk that its weak liquidity could be exacerbated by payment
delays from customers or reduced electricity output, which could
result from damage to transmission networks or to DTEK Energy's
own assets. Further depreciation of the hryvnia could also reduce
cash flows relative to the company's US dollar-denominated
debt.
The review period will allow Moody's to assess how the current geopolitical
tensions develop and their scale, duration and spillover effects
on the affected corporates' credit profiles, and the extent
to which these tensions and a possible extensive conflict will lead to
physical damage to assets and a sustained economic damage. In particular,
Moody's will examine the potential negative implications for the
companies' liquidity amid heightened borrowing costs and a sustained
depreciation of the hryvnia, especially in the event of sustained
foreign investor outflows. Moody's will look to conclude
the review when these credit implications are more evident, particularly
as the impact of the conflict becomes clearer.
Further downgrade could be driven by 1) sovereign downgrade and 2) evidence
of a weakening in the companies' credit profiles as a result of
pronounced physical damage to assets, market and logistics disruptions,
cash flow generation and impaired liquidity.
PRINCIPAL METHODOLOGIES
The principal methodology used in rating Metinvest B.V.
was Steel published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1296098.
The principal methodology used in rating MHP SE was Protein and Agriculture
published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1296919.
The principal methodology used in rating Ferrexpo plc was Mining published
in October 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1292752.
The principal methodology used in rating DTEK Energy B.V.
was Unregulated Utilities and Unregulated Power Companies published in
May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1066389.
Alternatively, please see the Rating Methodologies 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 May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1280297.
COMPANY PROFILES
MHP SE (MHP), domiciled in Cyprus, is one of Ukraine's leading
agro-industrial groups. The company's operations include
the production of poultry and sunflower oil, and the production
and sale of convenience foods. The company is vertically integrated
into grain and fodder production, and has one of the largest land
banks in Ukraine. For the 12 months that ended 30 September 2021,
the company's total revenue and Moody's-adjusted EBITDA amounted
to $2.1 billion and $625 million, respectively.
MHP's controlling beneficiary shareholder, with a stake of around
60%, is Yuriy Kosyuk, the company's founder and CEO.
The company has traded on the London Stock Exchange since its May 2008
IPO.
Metinvest B.V. (Metinvest), registered in the Netherlands,
is the holding company of a vertically integrated steel and mining group,
Metinvest, with assets in Ukraine, the European Union (EU),
the UK and the US. The company produces finished flat and long
steel products, pipes, rails, semifinished steel products
(slabs), pig iron and coke products, iron ore and coking coal
concentrate, and iron ore pellets. In 2020, Metinvest
reported revenue of $10.5 billion (2019: $10.8
billion) and its Moody's-adjusted EBITDA was $1,715
million (2019: $1,141 million). Metinvest's
major shareholders are System Capital Management (71.24%)
and SMART group (23.76%).
Headquartered in Switzerland and incorporated in the UK, Ferrexpo
plc (Ferrexpo) is a mid-sized iron ore pellet producer with mining
and processing assets located in Ukraine. The company engages in
the mining, processing and selling of iron ore pellets. It
exports all of its production abroad, with around 45% of
last twelve months ending June 2021 revenue of $2.3 billion
generated in Asia, 42% in Europe and the rest primarily in
Turkey and MENA. Ferrexpo is listed on the London Stock Exchange,
with 50.3% of its shares held by Fevamotinico S.a.r.l,
a Luxembourg based holding company owned by Kostyantin Zhevago,
with the remaining shareholding representing free float.
DTEK Energy B.V. (DTEK Energy) is Ukraine's largest private
power generator. As of January 2022, the group operated eight
thermal power generation plants with total installed capacity of 13.3
gigawatts, three coal processing plants, nine coal mines and
two coal-related machinery manufacturers. DTEK Energy accounted
for 16% of Ukraine's total generated electricity in 2021 and 60%
of Ukrainian coal production, all of which was consumed in the company's
thermal power plants. DTEK Energy is indirectly owned by DTEK B.V.,
which also operates electricity distribution and supply, renewable
energy, gas production and commodity trading businesses in Ukraine.
DTEK B.V. is fully owned by the financial and industrial
group System Capital Management, whose 100% shareholder is
Rinat Akhmetov.
REGULATORY DISCLOSURES
The List of Affected Credit Ratings announced here are a mix of solicited
and unsolicited credit ratings. For additional information,
please refer to Moody's Policy for Designating and Assigning Unsolicited
Credit Ratings available on its website www.moodys.com.
Additionally, the List of Affected Credit Ratings includes additional
disclosures that vary with regard to some of the ratings. Please
click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_209009
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• EU Endorsement Status
• UK Endorsement Status
• Rating Solicitation
• Issuer Participation
• Participation: Access to Management
• Participation: Access to Internal Documents
• Releasing Office
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 credit rating action on the
support provider and in relation to each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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 ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
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 rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
