Fitch downgrades Metinvest rating to RD

Fitch has downgraded the long-term ratings of Ukraine’s largest steelmaker and iron ore miner Metinvest (METINV) from CCC to RD. The rationale behind the downgrade is Metinvest’s inability to timely repay USD 113 mln in PXF loans in March. Previously, Moody’s downgraded the probability of default rating to D-PD from Caa3-PD on the same grounds, with negative outlook.

Roman Topolyuk: The ratings’ downgrades, and all the recent negative news on Metinvest, have put little downside pressure on bonds’ prices so far. This includes  the announcement of default on PXF, the offered maturity extension of the USD 114 mln 2015 Eurobonds to January 2016, and the suggested waiver on cross-default options for all three Eurobonds issues. However, the clouds are gathering above Metinvest’s debt, and the company’s notes are far from being a relatively safe bet, as certain holders of PXF have abstained from extending the maturity of their lending’s. The deprivation of bondholders’ cross-default option offered by the management, for some time period, is not likely to be smoothly approved at the votes scheduled for Apr. 29 and May 1. Therefore, the stand-off between the company and its lenders is likely to continue. We reiterate our negative view on Metinvest bonds.