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Standard & Poor’s Ratings Services has assigned its ‘ruA+’ national scale rating to the R900mn (US$28.7mn) two-year, with a put option after six months, senior unsecured bond issue proposed by Russia-based steel company OAO Magnitogorsk Metallurgical Kombinat (MMK; B/Stable/–; ‘ruA+’).

“The bond rating mirrors the ‘ruA+’

  • Russia national scale issuer credit rating on MMK. The rating on MMK reflects the challenging environment in the global steel industry, the company’s ambitious investment plans, and the expected privatisation of the 23.76% government stake in the organisation,” says Standard & Poor’s credit analyst Elena Anankina. “These constraints are partly offset by the benefits of a competitive cost base, high export levels, an improving domestic environment, and MMK’s position as Russia’s largest steel-maker with a domestic market share of 19%.”

    MMK is an integrated steel-maker, with sales of US$1.9bn on 9.7mn metric tons of steel products in 2002, based in Magnitogorsk in the southern Urals.

    The ratings and the stable outlook on MMK incorporate the long-term challenges of the global steel industry and the improving domestic environment in Russia. It also reflects Standard & Poor’s expectation that MMK will maintain a competitive cost position, limit working capital growth, benefit from its investments in modernization, and generate adequate cashflow to service its debt. Free operating cashflow after capital expenditure will be limited. Standard & Poor’s will closely monitor any acquisitions, supply risks, and share buyback operations in connection with the planned privatisation of the government’s stake later in 2003.