S&P downgrades MHP, ULF ratings to sovereign

The Standard & Poor’s rating agency lowered the credit ratings of the Eurobonds of farming issuers MHP (MHPSA) and Ukrlandfarming (ULF, UKRLAN) to “CCC-” from “CCC,” the agency reported on Dec. 24. S&P sees no reason to rate these companies above sovereign (the government rating was downgraded to “CCC-” on Dec. 19) as the agency does not see their liquidity positions being solid enough “to withstand the restrictions on foreign currency … if the sovereign were to default.” At the same time, S&P stressed that the companies’ standalone credit quality – before taking into account potential negative sovereign intervention – is higher than that of the sovereign.

Separately, S&P estimated the financial risk as being “intermediate” for MHP and “significant” for ULF. It estimated liquidity as being “less than adequate” for MHP and “weak” for ULF.

Alexander Paraschiy: The ratings move is of little surprise, given last week’s downgrade  of Ukraine’s sovereign rating by S&P. The agency covers two other Ukrainian corporate issuers of Eurobonds, whose bonds will be unavoidably downgraded soon. They are Ferrexpo (FXPOLN), whose rating is currently “CCC+” (two notches more than Ukraine’s sovereign), and Ukrainian Railways (RAILUA), whose rating is “CCC”, so far