Fitch Downgrades 5 Ukrainian Corporates on Sovereign Action

20.02.2015

On 13 February 2015, Fitch downgraded Ukraine's Long-term foreign currency Issuer Default Rating (IDR) to 'CC' from 'CCC' and affirmed its Long-term local currency IDR at 'CCC'. The issue ratings on Ukraine's senior unsecured foreign currency bonds were downgraded to 'CC' from 'CCC' while the senior unsecured local currency bonds were affirmed at 'CCC'. The Country Ceiling was affirmed at 'CCC' and the Short-term foreign currency IDR at 'C' (see 'Fitch Downgrades Ukraine's FC IDR to 'CC'; Affirms LC IDR at 'CCC'' at www.fitchratings.com).

Today's corporate rating actions reflect heightening concerns about the on-going deterioration of the liquidity position of Ukrainian corporates in the face of a weakening sovereign credit profile and local economic problems, which may ultimately threaten companies' ability to meet both their foreign and local currency obligations. However, it also reflects the fact that Fitch believes that corporates with a 'CCC' foreign currency IDR may be able to survive the shock of any sovereign debt crisis and are not expected to be prevented from servicing their foreign debt obligations by the imposition of capital controls or a formal moratorium.

This rating action commentary also corrects the one dated 5 September 2014, which did not include an upgrade of DTEK Holdings BV's long-term senior unsecured national rating.

The rating actions are as follows:

MHP S.A.
Long-term local currency IDR: affirmed at 'CCC''
Long-term foreign currency IDR: affirmed at 'CCC'
Foreign currency senior unsecured rating: affirmed at 'CCC'; Recovery Rating of 'RR4'

The affirmation of the IDRs reflects the adequate liquidity position of the company due to expected positive free cash flow in 2015 and an available undrawn USD200m loan aimed at refinancing a USD235m Eurobond due April 2015. Fitch expects management to maintain a reasonable financial policy in terms of capex and dividends so as not to jeopardise the company's credit metrics and financial flexibility.

Please see 'Fitch Affirms MHP S.A. at 'CCC' dated 3 April 2014 at www.fitchratings.com for Key Rating Drivers. Rating Sensitivities are as follows:

Negative: Future developments that could lead to negative rating action on the local currency IDR include:

- Liquidity shortage caused by limited available bank financing of working capital investments or by refinancing at more onerous terms than expected.
- Further significant hryvnia depreciation, sustained operational underperformance or larger than expected capex and dividends resulting in material weakening of MHP's credit metrics.

A downgrade of the local currency IDR would also result in a downgrade of the foreign currency IDR.

Positive: An upgrade of the local currency IDR would only be possible if Fitch considers there has been a sustained improvement in the issuer's operating environment. An upgrade of the foreign currency IDR would only be possible if Ukraine's Country Ceiling was raised.

OJSC Myronivsky Hliboproduct (MHP S.A.'s 99.9% owned subsidiary)
Long-term local currency IDR: affirmed at 'CCC'
Long-term foreign currency IDR: affirmed at 'CCC'
National long term rating: downgraded to 'A+(ukr)' from 'AA-(ukr)'; Outlook Stable

Please see Key Rating Drivers and Rating Sensitivities for M.H.P. S.A. above.

Source: https://www.fitchratings.com/

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