13 October 2016
On October 12 Moody’s affirmed Ferrexpo rating at Caa3 and changed its outlook from ‘negative’ to ‘stable’. According to report stable outlook reflects improved cash generation profile of the company and its general financial standing.
Moody’s notes better product mix (94% share of 65% Fe premium pellets in total sales) and decreased C1 cash cost of the company in current year. Agency acknowledges that Ferrexpo’s financial profile is strong as for Caa3 rating (Moody’s expects Net Debt/EBITDA at below 3.0x in FYs2016-16), but highlights high refinancing risk for Y2017 (USD 202M of total debt to be repaid) and Y2018 (USD 328M) and general country risk.
Basing on estimated EBITDA of Ferrexpo for Q3 at USD 100M (factual value for H1 – USD 160M), still favorable current market fundamentals for the company, unless there will be sharp drop of pellets prices from current USD 100/t to below USD 60-65/t level, we expect that the company will be able to fulfill its obligations in Y2017, risk is mainly for Y2018 (but, taking into account improved fundamentals, we see probability of successful obligations refinancing or maturity extension as rather high).
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