Azovstal Capital B.V.
Metinvest B.V.
Credit Opinion: Metinvest B.V.: Update following downgrade
Credit Opinion: Metinvest B.V.: Update to credit analysis
Announcement of Periodic Review: Moody's announces completion of a periodic review for a group of Steel issuers
Rating Action: Moody's takes actions on three Ukrainian corporates following sovereign rating being downgraded
Rating Action: Moody's takes actions on four Ukrainian corporates following sovereign rating being placed on review for downgrade
Moody's places Metinvest's B1 corporate family rating and Azovstal's B2 rating on review for possible downgrade
Approximately USD 175 million of long term debt securities affected
Frankfurt, May 12, 2009 -- Moody's Investors Service has today placed Metinvest's B1 corporate family rating, Aa3.ua national scale rating and Azovstal Capital's B2 rating for loan participation notes on review for possible downgrade.
The rating action was prompted by (i) Moody's concerns that the business outlook on the steel industry and the Ukraine may lead to a substantial deterioration of the company's leverage and profitability ratios, (ii) the company's acquisition of US coal mining company United Coal thereby possibly releveraging the companies' balance sheet, (iii) the company's short term liquidity situation, which heavily depends on the company's ability to continue generating sizable free cash flows in challenging markets and to retain the support of its main banks to provide required liquidity.
The review will therefore focus on (i) Metinvest's expected profitability and cash flow in the wake of the weak economic environment, (ii)Metinvest's ability in the short to medium term to fund its debt maturities from cash generation, (iii) the strategic rationale and valuation for the acquisition of United Coal, and (iv) the impact on its creditworthiness of the difficult political and economic environment of the Ukrainian state.
Moody's understands that, despite the weak demand for steel products in general, the company has been able to generate a positive result in the first couple of months in 2009 and generated free cash flows, which have contributed to the financing of the first instalment for the acquisition of United Coal and to other committed cash outflows, such as dividends, capex and debt maturities.
Metinvest currently benefits from the substantial depreciation of the Ukrainian local currency and its self-sufficiency in raw materials which gives the company a significant cost advantage against other steel companies with a focus on the semi-finished steel products.
For the assignment of this rating, Moody's has used its methodology for the Global Steel Industry, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.
Moody's last rating action on Metinvest was to downgrade the corporate family rating to B1 from Ba3 and Azovstal Capital's issuer rating to B2 from B1 on 05 November 2008.
Metinvest B.V., a company set up under Dutch law, but with major operations in Donetsk/Ukraine is the largest steel and iron ore producer of the Ukraine. In 2008 the company generated revenues of USD 13.3 billion and operating profit of USD 4 billion. Metinvest is 75% owned by System Capital Management, an investment holding company in the Ukraine. 25% (blocking stake) of Metinvest's shares are owned by Smart Group based in the Ukraine.
On Review for Possible Downgrade:
..Issuer: Azovstal Capital B.V.
....Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently B2
..Issuer: Metinvest B.V.
....Probability of Default Rating, Placed on Review for Possible Downgrade, currently B1
....Corporate Family Rating, Placed on Review for Possible Downgrade, currently B1
Outlook Actions:
....Outlook, Changed To Rating Under Review From Negative
Eric de Bodard
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Matthias Hellstern
Moody's Deutschland GmbH