Ferrexpo credit rating raised to B2 by Moody’s, cuts outlook to Negative

Moody’s Investors Service announced on June 16 it has
raised the corporate family rating of iron ore miner and pellet maker Ferrexpo
(FXPO LN) to B2 from B3, also changing the outlook to Negative from Positive.

The decision follows its upgrade of Ukraine’s sovereign rating on June 12.
Moody’s cited recent corporate governance issues for its Negative outlook.
Firstly, Moody’s mentioned the inconclusive internal investigation of the Blooming Land affair, a charity
to which Ferrexpo donated. Secondly, the agency discussed the recently reported
issue of football club (FC) Vorskla – a related party for Ferrexpo – selling
its services to Ferrexpo and lending money to parties related
to Ferrexpo’s majority owner Kostyantin Zhevago.

Moody’s will stabilize its outlook on Ferrexpo’s
rating if the company clearly establishes that no money was misappropriated in
the Blooming Land and FC Vorskla affairs, and that there are no disclosures of
further governance issues of this nature, the agency’s report said.

Ferrexpo’s rating might be downgraded if further
corporate governance issues heighten the group’s reputational and financial
risk profile, according to the report.

Ferrexpo is currently rated by Moody’s at one notch
above Ukraine’s sovereign level of B3. Moody’s previous action on Ferrexpo was
a Dec. 10, 2019 outlook revision to Positive from Stable. Currently, Ferrexpo
is also rated at BB-/Stable by Fitch (two notches
above sovereign) and B-/Negative by S&P (one notch
below sovereign).

Dmytro Khoroshun: It is unlikely that Ferrexpo will ever be able to confirm that no
donated money was misappropriated by Blooming Land, because Ferrexpo said it
was unable to obtain the required data from the charity. Therefore, Moody’s
might determine the need to maintain a Negative outlook on its Ferrexpo rating
or even lower it, as S&P recently did, because of this corporate governance issue.