OREANDA-NEWS. The downgrade of MHP follows the same action on Ukraine and our downward revision of the country's transfer and convertibility (T&C) assessment to 'CCC+' from 'B-', and takes into account that MHP's core operating assets are in Ukraine. The revised T&C assessment constrains the foreign currency rating on MHP because of the likelihood of increased restrictions on foreign exchange repatriation (changing funds held abroad into local currency) and, more generally, negative sovereign interaction.

S&P believes that Ukraine's deteriorated creditworthiness increases the risk of the introduction of laws instructing export companies to convert their hard currencies, which could affect MHP's dollar-denominated debt service.

S&P also believes that weakening sovereign credit quality and political instability in Ukraine could constrain access to financial markets for Ukrainian issuers. Increasing taxes or delays in refunds of taxes can lead to working capital outlays and additional debt. MHP has a bond maturing in the first half of 2015 and therefore depends on access to capital markets.

S&P regard MHP's country risk exposure to Ukraine as a key risk factor. MHP derives over two-thirds of total sales in its domestic market.

MHP has an ambitious expansion strategy, in S&P's view, with related execution risks, and is exposed to the volatile agribusiness industry. The company has indicated it is increasing its poultry production capacity to 600,000 tons and investing in land bank expansion.

S&P would revise the outlook to stable if conditions in Ukraine stabilized and

we saw lower risk related to currency controls and repatriation requirements.

Any rating upside is closely linked to a positive rating action on the

sovereign. However, upside could also occur if MHP demonstrated its ability to

continue servicing its foreign currency debt despite the liquidity constraints

stemming from the sovereign debt.