Ferrexpo credit rating raised by Fitch to B/Positive

Fitch raised the long-term issuer default rating of
iron ore miner and pellet maker Ferrexpo (FXPO LN, FXPOLN) to B from B- with a
Positive outlook, the ratings agency reported on Jan. 17. Following the
arrangement of the USD 195 mln PXF, Ferrexpo is expected to “be able to redeem
its fairly large upcoming debt maturities in 2018 and 2019 from internally
generated cash flows and available cash balances,” Fitch reported.

The rating agency expects Ferrexpo’s EBITDA margin to
have amounted to 45% in 2017, before dropping to 39% in 2018, 36% in 2019, and
24% in 2020 owing to swelling global pellet supplies and higher costs.

Ferrexpo is now rated one notch above Ukraine’s
sovereign level, B-. Furthermore, Ukraine’s outlook is Stable, whereas
Ferrexpo’s is Positive. The rating agency noted that “should Ferrexpo maintain
a solid liquidity profile, its credit profile would be commensurate with a B+
rating.”

Fitch’s previous action on Ferrexpo was a Feb. 27,
2017 ratings hike to B- from CCC. Currently, Ferrexpo is rated at B-/Positive
by S&P (in line with sovereign) and at Caa1/Positive by Moody’s (one notch
above sovereign).

Dmytro Khoroshun: We agree with Fitch that the two USD 173 mln Eurobond principal
repayments on Apr. 7, 2018 and Apr. 7, 2019 seem very feasible for Ferrexpo.
Unless the company does something drastic, like issue a  new Eurobond, its
credit profile should remain strong in the near term. We retain our neutral
view on Ferrexpo Eurobonds.