Moody's downgrades five companies operating in Ukraine

Moody's Investors Service said it downgraded five companies operating in Ukraine: Metinvest BV, Fintest Trading Co. Ltd. (Donetsksteel), MHP SA, Lemtrans LLC and Ferrexpo plc. Their corporate family ratings were lowered to Caa1 from B3, and their probability of default ratings were lowered to Caa1-PD from B3-PD.

The agency downgraded the national scale ratings of Fintest, MHP and Lemtrans to Ba3.ua from Baa3.ua and Metinvest's national scale rating to Ba3.ua from Baa2.ua.

In addition, Moody's downgraded the senior notes issued by MHP and Metinvest to Caa1/(P)Caa1 from B3/(P)B3. The Caa1 rating on the senior notes of Ferrexpo Finance plc is unchanged.

Concurrently, all of the ratings were placed on review for downgrade.

The rating action follows Moody's action to downgrade Ukraine's sovereign rating to Caa1 from B3 and place it on review for downgrade as well as lower the country's foreign-currency bond country ceiling to Caa1 from B3.

The agency said the affected companies' business profiles and financial metrics are strong for a Caa1 rating, but their ratings are constrained by that of the sovereign because they are exposed to Ukraine's political, legal, fiscal and regulatory environment given that most or all of their assets are located within the country.

The companies' capacity to serve foreign-currency debt could be negatively affected by the potential actions taken by Ukrainian government to preserve the country's foreign-exchange reserves, Moody's added.

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