S&P cuts Azovstal Iron to CCC+

Standard & Poor's said it lowered the foreign-currency long-term corporate credit rating on JSC Azovstal Iron and Steel Works to CCC+ from B and its local-currency long-term corporate credit rating to B- from B and removed them from CreditWatch following its downgrade of the sovereign rating on Ukraine to CCC+/C.

The outlook remains negative.

The agency also lowered the rating on the senior unsecured debt issued by Azovstal Capital BV to CCC from B- and removed it from CreditWatch. The recovery rating is unchanged at 5.

"The downgrade reflects Ukraine's worsening macroeconomic environment, highlighted by our downgrade of the sovereign," S&P analyst Andrey Nikolaev said in a statement.

"We also note that the decline in sovereign credit quality could hamper access to financing for Azovstal and its parent Metinvest BV, particularly given currently difficult global financial markets."

Ratings are further pressured by the current very weak global steel industry conditions, the company's weak liquidity, volatile cash flow generation and aged asset base that requires large capital expenditures, the agency said.

These risks are somewhat tempered by Azovstal's high proportion of exports, access to low-cost resources in Ukraine and vertical integration in iron ore, coke and scrap at the parent level, S&P noted.

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