Standard & Poor’s Ratings Services has affirmed its ‘B’ long-term corporate credit rating on Russian steel company OAO Magnitogorsk Metallurgical Kombinat (MMK), following the company’s strong first-half 2003 financial results. The outlook is positive.
At the same time, Standard & Poor’s affirmed its ‘ruA+’ Russia national scale ratings on the company and its ‘B’ senior unsecured debt rating on related entity MMK Finance SA.
“During the period of high steel prices in the first half of 2003 MMK demonstrated strong financial performance. The privatisation of the Russian government’s 23.76% stake in MMK, however, which is scheduled for 2003, remains the key uncertainty in the short term,” says Standard & Poor’s credit analyst Elena Anankina.
MMK’s management controls a 62% stake in the company and is expected to seek control of the government stake. The effect of the privatisation process on the company’s credit quality is still uncertain and will depend on the identity of the successful buyer, the price to be paid, and the structure of the transaction. The company had total debt of US$549mn at <
“Standard & Poor’s believes MMK’s current strengths are likely to warrant a one-notch upgrade if the privatisation does not significantly drain the company’s financial resources or threaten to alter its demonstrated strategy of measured investment in modernisation,” adds Anankina. “MMK’s credit quality is expected to benefit from the improving sovereign environment in Russia and the company’s resilience to industry pressures, if the company maintains its competitive cost base and curbs working capital outlays.”