Fitch preliminary assigns rating B+ to planned Eurobonds issue by Kernel

18 January 2017

In its press-release Fitch noted that it preliminary assigned rating B+ to expected Eurobonds issue by Kernel Holding and placed its ratings on Rating Watch Positive.

Positive Rating Watch means that liquidity positions of the company are to improve in case of successful refinancing of existing short-term obligations by long-term Eurobonds and PXF facilities.

Fitch notes that because of sales structure (export share in total revenues is more than 90%), Kernel is less dependent on general economic situation in Ukraine vs. its peers, though agency expects decrease of Kernels EBITDA to USD 260-280M starting from FY2018 vs. USD 346.4M in FY2016 (noting positive short-term effect from UAH devaluation on profitability during last years).

Other Fitch assumptions are as follows: annual dividends on existing level of USD 20M per annum, CAPEX USD 100-120M annually, M&A expenses during coming years (in total) USD 400M, raw materials suppliers pre-financing USD 100-120M starting from FY2018.

As a reminder, current investment plans of Kernel imply expansion of grains port terminal in Chernomorsk (to double current annual throughput capacity from existing 4M tons, estimated cost USD 100-120M), increase of oilseeds crushing capacities by 1.5M tons (estimated cost USD 130-150M), land bank expansion by 150k ha (USD 60-80M plus increase of WC needs by approximately the same amount).

So, total investments amount estimation - USD 300-350M.

We preliminary estimate Kernel EBITDA in FY2017 at about USD 320-330M (thereof USD 160M EBITDA of Farming segment). By Fitch information debt of the company as of January'17 makes USD 600M.

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