Kernel gets Fitch rating upgrade to BB-, plans new Eurobond

Fitch Ratings upgraded the long-term issuer default
rating of Ukrainian sunflower oil producer and grain trader Kernel (KER PW, KERPW)
to BB- from B+ with a Stable outlook, the agency reported on Sept. 30. The
rating upgrade was based on expectations of a high share of export profits and
improving macroeconomic stability in Ukraine, the agency said.

In its press release on the rating action, Fitch also
wrote about Kernel’s plans to issue USD 300-350 mln in new Eurobonds with 5-7
years maturity. The agency assigned a BB- (expected) rating for Kernel’s new
issue. Fitch expects that part of new bond issue will be used to repay a portion
of its USD 185 mln in short-term borrowings.

Andriy Perederey: Kernel’s
rating update is a positive surprise to us, taking into account that in October
2018, Fitch stated that such an upgrade in the next three years is unlikely. We
see the company’s strong FY2019 results (EBITDA
surged 55% yoy, net debt to EBITDA ratio dropped to 2.05x from 2.80x a year
before) made the rating move possible.

After the upgrade, Kernel’s rating remains two notches
higher than sovereign. The company’s planned Eurobond issue will support its
liquidity and facilitate its CapEx needs in FY2020 (about USD 300 mln).

We remain bullish on KERPW Eurobonds.