Fitch raises Metinvest rating to B+

The long-term issuer default rating of Ukraine’s
largest steelmaker Metinvest (METINV) was upgraded by Fitch to B+/Stable from B/Positive
on Apr. 10. The agency cited Metinvest’s commitment to prioritize CapEx, debt
repayment and working capital funding over dividends as a reason for the
upgrade. Fitch expects Metinvest to generate annually FCF before dividends of
not less than USD 500 mln for the next few years.

Fitch’s rating of Metinvest is now two notches above
Ukraine’s sovereign rating. Metinvest’s two other long-term credit ratings are
from S&P: B-/Positive, which is the same as Ukraine’s sovereign, and the
outlook on which was upgraded on Jan. 29. The second
is from Moody’s: a B3/Stable grade, which was raised from Caa1 on Dec. 27, 2018
and which is one notch above Ukraine’s sovereign.

Dmytro Khoroshun: The upgrade
is justified by Metinvest’s strong business, and we expect S&P to raise
Metinvest’s rating to B this year. We also think that once it becomes clear
that Metinvest has resumed returning money to its shareholders, with USD 540 mln returned in 2018,
the holding’s standing with the markets and the rating agencies will not
deteriorate. This is because, as Fitch notes, Metinvest is able to generate substantial
free cash flows and thus can afford dividends of up to USD 500 mln per year.