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ccharlwoodon Jun 08, 2009 10:34am
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Severstal downgrade
Severstal downgradeMonday, 08 Jun 2009
Fitch downgrades SeverStal on falling earning margins
Monday, 08 Jun 2009
Fitch, the international ratings agency owned by the Paris-listed Fimalac has issued a downgrade notice for Severstal lowering its issuer default and senior unsecured ratings from BB to BB-. The agency has also placed Severstal on a further watch for the possibility of deteriorating financial information leading to a further downgrade.
A report issued by Fitch says the action reflects the “view that Severstal’s profitability and credit metrics will deteriorate in 2009 to 2012 to levels that are not consistent with a ‘BB’ rating. EBITDA margin dropped to down by 5.7% and 7.4% in Q1 2009 and Q4 2008 respectively from an average 23% to 24% in 2006 to 2008. Fitch forecasts that EBITDA margin will remain in single digit in 2009 to 2010. Fitch is also concerned about uncertainty surrounding steel product volume and pricing trends over 2009 to 2010 especially in the automotive and construction sectors to which Severstal is most exposed.”
Responding to Severstal’s financial report this month, disclosing that Severstal North America made a USD 243 million EBITDA loss in the Q1 and to this site’s publication last week of borrowing covenants in Severstal 2013 and 2014 Eurobonds, Fitch has announced “Severstal attempts to restructure its US assets have failed to improve the performance of its North America division, which in Q109 reported an EBITDA margin of -25. Fitch expects Severstal 2009 profitability to remain under pressure and to materially weaken from 2006-2008 levels. As a result, the agency believes that Severstal could breach covenants under various facilities.”
Fitch told the market it will assess expected developments in Severstal key markets and the adequacy of anti-crisis measures announced by management to reduce financial and operational risks.
(Sourced from Global Post)