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Fitch Downgrades Industrial Union of Donbass to ‘B-’; Withdraws Ratings

April 3, 2009 "Fitch Ratings"
Fitch Ratings-London /Moscow-3 April 2009: Fitch Ratings has today downgraded Ukrainian-based steel producer Corporation Industrial Union of Donbass's (ISD) Long-term Issuer Default Rating (IDR) to 'B-' (B minus) from 'B'. The Outlook on the Long-term IDR is Negative. At the same time, the agency has affirmed the company's Short-term IDR at ‘B’. Fitch has simultaneously withdrawn ISD's ratings. The agency will no longer provide ratings or analytical coverage on this issuer.

The downgrade reflects Fitch's view that the current global recession and the associated volatility in the demand and pricing of steel products have weakened ISD’s capacity for meeting its financial obligations and that as a result the company is likely to breach its financial covenants in FY09. The agency is forecasting a 30% reduction in ISD’s production volume for 2009, which is likely to see the company record net debt/EBITDAR of between 3.0-3.5x in FY09 versus the covenanted 2.6x under its loan facilities.

The Negative Outlook reflects Fitch's view that the Ukrainian metal and mining industry is expected to recover more slowly than the global metal and mining industry. ISD's high level of indebtedness and limited covenant headroom in a challenging debt and banking environment are also captured in the Negative Outlook.
Company — ISD
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