London, March 10, 2022 -- Moody's Investors Service ("Moody's") has today taken action on three Ukrainian corporates. The rating actions follow Moody's decision on 4 March to downgrade the Government of Ukraine's foreign and domestic currency long-term issuer ratings and foreign currency senior unsecured debt ratings to Caa2 from B3. The ratings of the Government of Ukraine remain on review for downgrade. Ukraine's local- and foreign-currency ceilings have been lowered to Caa1 from B2.
Details of the Ukraine sovereign rating action can be found here: https://www.moodys.com/research/--PR_463451.
Moody's has taken rating actions on the following companies to reflect credit linkages with the Ukraine sovereign:
Ferrexpo plc (Ferrexpo)
- Caa2 corporate family rating (CFR) and Caa2-PD probability of default rating (PDR) with negative outlook from B3 and B3-PD ratings on review for downgrade
MHP SE (MHP)
- Caa3 CFR and Caa3-PD PDR with negative outlook from B3 and B3-PD ratings on review for downgrade
- Caa3.ua national scale rating (NSR) with negative outlook from Baa2.ua rating on review for downgrade
Metinvest B.V. (Metinvest)
- Caa3 CFR and Caa3-PD PDR with negative outlook from B3 and B3-PD ratings on review for downgrade
- Caa3.ua NSR with negative outlook from Baa2.ua rating on review for downgrade
Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL463738 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.
The affected corporates are exposed to Ukraine's political, legal, fiscal and regulatory environment to varying degrees. The rating downgrade to the sovereign rating level or one notch below, reflects the financial and operational challenges these companies are facing in the midst of the invasion, including disruption to the workforce and access to the necessary infrastructure to enable them to freely export their goods and meet debt service requirements in the currently extraordinarily stressed circumstances. The rating actions are a reflection of intensification of Russia's (Government of Russia, Ca negative) military invasion of Ukraine, and as a result reflect these developments that are outside the issuers' control.
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 its employees and assets. However, the Caa2 rating also reflects Ferrexpo's net cash position with only limited trade financing and letters of credit debt outstanding, which is in Ukraine and outside covered by allocated cash.
Moody's expects that the broadened invasion of Ukraine by Russia will cause material and lasting damage to Ukraine's economic and fiscal strength. The intensification of the military conflict and the targeting of large cities has already and will likely continue to cause significant damage to Ukraine's infrastructure, although it is not currently possible to assess the exact magnitude of that damage. Even if the military conflict is brought to an end relatively soon and significant external support is provided to help reconstruction, it will likely take a significant amount of time to repair the extensive damage to the country's productive capacity caused by the military conflict. Moreover, the heavy human toll that the military conflict will inflict, together with a significant displacement of the population, will exacerbate already challenging demographic trends and durably constrain Ukraine's economic potential.
The negative rating outlook reflects the high risks for the affected corporates' credit profiles, especially with regard to long-lasting economic damage and physical damage to assets. There is also risk to the companies' liquidity amid heightened borrowing costs, a sustained depreciation of the hryvnia and sudden decline in cash flow generation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of the ratings at this stage is unlikely. Further downgrade could be driven by 1) sovereign downgrade and 2) further 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.
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. 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.
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 (75%) and SMART group (25%).
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.
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 https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL463738 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.
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.
Moody's Investors Service Ltd.
One Canada Square
London, E14 5FA
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454