OREANDA-NEWS. Fitch Ratings has affirmed Ukraine-based agricultural producer Mriya Agro Holding Public Limited's (Mriya) Long-term foreign currency Issuer Default Rating (IDR) at 'CCC'. The rating is capped by Ukraine's Country Ceiling of 'CCC'. Fitch has also affirmed the company's Long-term local currency IDR at 'B-' with a Negative Outlook and downgraded the National Long-term rating to 'AA-(ukr)' from 'AA(ukr)'.

The foreign and local currency IDRs reflect the political and economic uncertainty in Ukraine, which may ultimately threaten Mriya's financial flexibility and its ability to meet its debt obligations. The downgrade of the National Long-term rating reflects the company's exposure to refinancing risks and weak liquidity position relative to other corporates in the country. However, Fitch believe that seasonal funding in Q214 (when working capital peaks) has been procured and therefore expect some improvement in liquidity in 2H14, supplemented by conservative capex plans.

Mriya's ability to continue funding its operations while keeping leverage under control will remain key rating factors as long as the current difficult operating environment persists.

RATING SENSITIVITIES
Positive: Future developments that could lead to positive rating actions on the Long-term local currency IDR, provided the operating environment in Ukraine improves on a sustained basis, include:
-FFO margin above 25% (FY13: 33.6%) on a sustained basis
-Improvement in FCF margin to only moderately negative territory (FY13: -33.5%)
- FFO adjusted gross leverage consistently below 3x (FY13: 4.3x)
- FFO fixed charge cover strengthening above 3x (FY13: 2.7x)

An upgrade of the foreign currency IDR would be contingent on Ukraine's Country Ceiling being upgraded.

Negative: Future developments that could lead to negative rating action on the Long-term local currency IDR include:
- Liquidity shortage caused by the limited available bank financing of working capital investments or by refinancing at more onerous terms than expected
- FFO adjusted gross leverage rising above 5x on a sustained basis due to sustained operational underperformance or aggressive capex plans
- FFO fixed charge cover weakening below 2x.