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Concorde Capital Research: S&P affirms B long-term rating, Stable outlook for Kernel

October 02, 2019 | Cbonds

S&P Global Ratings affirmed on Sept. 30 the long-term credit rating of Ukrainian sunflower oil producer and grain trader Kernel (KER PW, KERPW) at B with a Stable outlook. It also assigned a B rating to the company's planned Eurobond issue. The company’s rating affirmation was based on its stable operating performance during FY2019 and was in line with agency’s base case. Kernel will have executed large capital expenditures during the next 12 months, in the agency's view. And Kernel’s FOCF will remain negative (about USD 160-180 mln) in FY2020, while its FOCF will return to positive values by the end of FY2021, the agency said. Also, S&P anticipates that Kernel’s adjusted debt to EBITDA ratio will be close to 4.0x in FY2020.

The agency said it is unlikely to consider a rating upgrade during the next 12 months, unless the company’s FOCF returns to positive and adjusted debt to EBITDA ratio will be closer to 3.0x.

Andriy Perederey: Unlike Fitch, which recently upgraded Kernel’s rating to BB- (two notches above sovereign level), S&P decided to keep Kernel’s rating unchanged this time, even after it upgraded its Ukraine sovereign rating to B. In this way, Kernel’s S&P rating, which was above sovereign until last week, was made equal to it. While this “effective downgrade” leaves less arguments for KERPW bonds to trade inside Ukraine’s sovereign curve, we remain bullish on its bonds.

Issue: Kernel Holding, 8.75% 31jan2022, USD

StatusCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
outstandingUkraine01/31/2022500,000,000 USD-/B/BB-

Company: Kernel Holding

Full company nameKernel Holding S.A.
Country of riskUkraine
Country of registrationLuxembourg
IndustryFood industry


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