OREANDA-NEWS. Fitch Ratings has downgraded the senior unsecured rating of Hungarian fertiliser manufacturer Nitrogenmuvek Zrt to 'B+' with a Recovery Rating of 'RR4' from 'BB-' with a Recovery Rating of 'RR3' as a result of changes to the agency's 'Country-Specific Treatment of Recovery Ratings' criteria, published 22 February 2016.

KEY RATING DRIVERS
Instrument Downgrade Criteria Driven
In the criteria update, Hungary was moved from a 'group C' to a 'group D' jurisdiction. As a result, Recovery Ratings are now subject to a soft cap of 'RR4'. All of the group's operating assets are located in Hungary, as are the majority of the group's sales. As such, the Recovery Rating of Nitrogenmuvek's senior unsecured notes has been limited to 'RR4', from 'RR3' previously, resulting in a senior unsecured instrument rating of 'B+', in line with the company's IDR of 'B+'.

RATING SENSITIVITIES
An upgrade is unlikely due to the capex programme and the scale and limited diversification of the company.

Future developments that could lead to a negative rating action include:
- Shareholder distributions, excessive capex spend and a weak fertiliser price environment resulting in ongoing FFO adjusted net leverage above 2.0x, or expectations of long-term FFO adjusted gross leverage above 2.5x.
- Sharp deterioration in fertiliser prices or demand with a sustained drop in the EBITDA margin of core fertiliser operations to below 20%.