OREANDA-NEWS. Fitch Ratings has downgraded five Ukrainian companies' ratings, following the agency's rating action on the Ukrainian sovereign.

On 13 February 2015, Fitch downgraded Ukraine's Long-term foreign currency Issuer Default Rating (IDR) to 'CC' from 'CCC' and affirmed its Long-term local currency IDR at 'CCC'. The issue ratings on Ukraine's senior unsecured foreign currency bonds were downgraded to 'CC' from 'CCC' while the senior unsecured local currency bonds were affirmed at 'CCC'. The Country Ceiling was affirmed at 'CCC' and the Short-term foreign currency IDR at 'C' (see 'Fitch Downgrades Ukraine's FC IDR to 'CC'; Affirms LC IDR at 'CCC'' at www.fitchratings.com).

Today's corporate rating actions reflect heightening concerns about the on-going deterioration of the liquidity position of Ukrainian corporates in the face of a weakening sovereign credit profile and local economic problems, which may ultimately threaten companies' ability to meet both their foreign and local currency obligations. However, it also reflects the fact that Fitch believes that corporates with a 'CCC' foreign currency IDR may be able to survive the shock of any sovereign debt crisis and are not expected to be prevented from servicing their foreign debt obligations by the imposition of capital controls or a formal moratorium.

This rating action commentary also corrects the one dated 5 September 2014, which did not include an upgrade of DTEK Holdings BV's long-term senior unsecured national rating.

The rating actions are as follows:

Avangardco Investments Public Limited
Long-term local currency IDR downgraded to 'CC'; from 'CCC'
Long-term foreign currency IDR: downgraded to 'CC'; from 'CCC'
Foreign currency senior unsecured rating: downgraded to 'CC'; from 'CCC'; Recovery Rating of 'RR4'
National Long-term rating: downgraded to 'BB(ukr)' from 'A(ukr)' , Outlook Negative

The downgrade of Avangardco's ratings reflects heightened uncertainty regarding repayment of the USD200m Eurobond due October 2015, given our worsened expectations on free cash flow generation ability in 2015 following recent significant hryvnia depreciation combined with an expected reduction in production volumes.

Please see 'Fitch Affirms Avangardco at 'CCC' dated 18 August 2014 at www.fitchratings.com for Key Rating Drivers. Rating Sensitivities are as follows:

Negative: Future developments that could lead to negative rating action on the local currency IDR include:
- Eurobond restructuring with a material reduction in the contractual terms meeting the definition of a distressed debt exchange under Fitch's criteria

Positive: Future developments that could lead to an upgrade of the local currency and foreign currency IDRs to 'CCC', include:
- Sufficient liquidity for repayment of Eurobond due October 2015 thanks to positive free cash flow generation in 2015 and/ or new bank financing.

Future positive rating action will remain subject to a sustained improvement in the issuer's operating environment in Ukraine.

Kernel Holding SA
Long-term local currency IDR: affirmed at 'CCC'
Long-term foreign currency IDR: affirmed at 'CCC'
National Long-term rating: downgraded to 'BBB+(ukr)' from 'A(ukr)'; Outlook Stable

The affirmation of the IDRs reflects our expectation that Kernel's liquidity position will not deteriorate due to the company's export orientation and high marketability of inventories. However, we note refinancing risks related to PXF facilities maturing in July-August 2015, which in our view are captured in the rating.

Please see 'Fitch Affirms Kernel at 'CCC' dated 1 October 2014 at www.fitchratings.com for Key Rating Drivers and Rating Sensitivities.

Metinvest B.V.
Long-term local currency IDR: affirmed at 'CCC'
Short-term foreign currency IDR: affirmed at 'C'
Long-term foreign currency IDR: affirmed at 'CCC'
Foreign currency senior unsecured rating: affirmed at 'CCC'; Recovery Rating of 'RR4'
Short-term local currency IDR: affirmed at 'C'
National Long-term rating: affirmed at 'BBB(ukr)', Outlook Stable
National Short-term rating: affirmed at 'F3(ukr)'

Metinvest has material export revenues received in hard currencies. The company's Ilyich and Azovstal steel plants have been operating at 50%-60% of their capacity while the Yenakiive steel plant was halted in mid-February 2015.

Please see 'Fitch Affirms METINVEST at 'CCC' dated 01 August 2014 at ww.fitchratings.com for Key Rating Drivers and Rating Sensitivities.

MHP S.A.
Long-term local currency IDR: affirmed at 'CCC''
Long-term foreign currency IDR: affirmed at 'CCC'
Foreign currency senior unsecured rating: affirmed at 'CCC'; Recovery Rating of 'RR4'

The affirmation of the IDRs reflects the adequate liquidity position of the company due to expected positive free cash flow in 2015 and an available undrawn USD200m loan aimed at refinancing a USD235m Eurobond due April 2015. Fitch expects management to maintain a reasonable financial policy in terms of capex and dividends so as not to jeopardise the company's credit metrics and financial flexibility.

Please see 'Fitch Affirms MHP S.A. at 'CCC' dated 3 April 2014 at www.fitchratings.com for Key Rating Drivers. Rating Sensitivities are as follows:

Negative: Future developments that could lead to negative rating action on the local currency IDR include:

- Liquidity shortage caused by limited available bank financing of working capital investments or by refinancing at more onerous terms than expected.
- Further significant hryvnia depreciation, sustained operational underperformance or larger than expected capex and dividends resulting in material weakening of MHP's credit metrics.

A downgrade of the local currency IDR would also result in a downgrade of the foreign currency IDR.

Positive: An upgrade of the local currency IDR would only be possible if Fitch considers there has been a sustained improvement in the issuer's operating environment. An upgrade of the foreign currency IDR would only be possible if Ukraine's Country Ceiling was raised.

OJSC Myronivsky Hliboproduct (MHP S.A.'s 99.9% owned subsidiary)
Long-term local currency IDR: affirmed at 'CCC'
Long-term foreign currency IDR: affirmed at 'CCC'
National long term rating: downgraded to 'A+(ukr)' from 'AA-(ukr)'; Outlook Stable

Please see Key Rating Drivers and Rating Sensitivities for M.H.P. S.A. above.

OJSC Creative Group Public Limited
Long-term local currency IDR: 'CC' maintained on Rating Watch Evolving (RWE)
Long-term foreign currency IDR: 'CC' maintained on Rating Watch Evolving
National long term rating: 'B-(ukr)' maintained on Rating Watch Evolving

The maintained RWE reflects the company's weak liquidity position and uncertainty about the renewal of its PXF facility, which has been in the process of being restructured since August 2014. This is mitigated by Creative's export-oriented operations and strong market position as a leading sunflower seed and soybean processor in Ukraine.

Please see 'Fitch Downgrades Creative to 'CC'; on RWE' dated 10 October 2014 at www.fitchratings.com for Key Rating Drivers and Rating Sensitivities

Ukrlandfarming PLC
Long-term local currency IDR: downgraded to 'CC' from 'CCC'
Long-term foreign currency IDR: downgraded to 'CC' from 'CCC'
Foreign currency senior unsecured rating downgraded to 'CC' from 'CCC'; Recovery Rating of 'RR4'
National Long-term rating: downgraded to 'BB(ukr)' from 'A(ukr)'; Outlook Negative

The downgrade of ULF's ratings reflects the company's weak liquidity position and increased refinancing risks both on consolidated and standalone level (i.e. excluding Avangardco).

Please see 'Fitch Affirms UkrLandFarming at 'CCC' dated 1 July 2014 at ww.fitchratings.com for Key Rating Drivers.

Rating Sensitivities are as follows:

Negative: Future developments that could lead to negative rating action on the IDR include:
- Non-payment of a material financial obligation or the formal announcement of a distressed debt exchange.

Positive: Future developments that could lead to an upgrade of the local currency and foreign currency IDRs to 'CCC', include:
- Improvement in the liquidity position thanks to strong positive free cash flow in 2015 and the ability to refinance upcoming maturities at reasonable terms.

Future positive rating action will remain subject to a sustained improvement in the issuer's operating environment in Ukraine.

NJSC Naftogaz of Ukraine
Long-term local currency IDR: affirmed at 'CCC'
Long-term foreign currency IDR: downgraded to 'CC' from 'CCC'

The rating action mirrors Fitch's rating action on Ukraine's sovereign ratings as Naftogaz's ratings are fully aligned with those of Ukraine. This approach reflects the company's strategic importance to the state as a monopolistic gas distributor, as well as state subsidies and other forms of tangible financial support provided to Naftogaz. The state directly guarantees some of Naftogaz's loans, which is another indication of its support. In addition, Naftogaz's performance is closely monitored by the IMF, Ukraine's major lender, which creates incentives for the state to keep Naftogaz adequately funded.

Please see 'Fitch Affirms Naftogaz at 'CCC' dated 11 February 2015 at www.fitchratings.com for Key Rating Drivers and Rating Sensitivities:

DTEK Energy B.V. (formerly DTEK Holdings B.V.)
Long-term local currency IDR: affirmed at 'CCC'
Short-term foreign currency IDR: affirmed at 'C'
Long-term foreign currency IDR: affirmed at 'CCC'
Foreign currency senior unsecured rating: affirmed at 'CCC'; Recovery Rating of 'RR4'
Short-term local currency IDR: affirmed at 'C'
National long term rating: affirmed at 'BBB-(ukr)', Outlook Stable
National long-term senior unsecured rating: affirmed at 'BBB-(ukr)'

On 5 September 2014 Fitch upgraded DTEK Holdings BV's National Long-term rating following a recalibration of the National Scale. The rating action commentary should have included an upgrade of the Long-term senior unsecured National rating as of that date and this rating action commentary also serves as a correction confirming that this rating was upgraded to 'BBB-(ukr)' from 'BB+(ukr)' and that this rating is now affirmed at BBB-(ukr).

DTEK Finance BV: Foreign currency senior unsecured rating: affirmed at 'CCC'; Recovery Rating of 'RR4'

DTEK Finance plc: Foreign currency senior unsecured rating: affirmed at 'CCC'; Recovery Rating of 'RR4'

DTEK's ratings reflect its standalone profile, constrained by the company's exposure to conflict areas, weak operating environment and high refinancing and FX risks. DTEK's operations continue broadly as expected outside the conflict areas. DTEK's liquidity at end-2014 was insufficient to cover the forthcoming short-term debt maturities, including USD200m notes due on 28 April 2015. We expect the company to generate some free cash flow, but a refinancing will be needed. Failure to secure refinancing in the coming weeks is likely to result in a downgrade.

Please see 'Fitch Downgrades DTEK's Long-term Local Currency IDR to 'CCC' dated 1 August 2014 at www.fitchratings.com for Key Rating Drivers and Rating Sensitivities.

Lemtrans LLC
Long-term local currency IDR: affirmed at 'CCC'
Long-term foreign currency IDR: affirmed at 'CCC'

The affirmation reflects that Lemtrans' operations are broadly in line with our expectations and the fact that the company does not have significant fixed assets in the conflict area, although its two major customers have operations there. Lemtrans is exposed to continued Hryvna devaluation and we view its liquidity as weak with short-term debt maturities (UAH895m mostly leases) exceeding its cash position at YE14 of UAH732m. We believe that Lemtrans' flexible capex will allow it to generate free cash flow to meet some of its upcoming lease repayments. However, a weakened liquidity position may lead a downgrade.

Please see 'Fitch Downgrades Lemtrans' Long-term Local Currency IDR to 'CCC' dated 22 August 2014 at www.fitchratings.com for Key Rating Drivers and Rating Sensitivities

Ferrexpo plc
Long-term foreign currency IDR: affirmed at 'CCC'
Short-term foreign currency IDR: affirmed at 'C'

Ferrexpo Finance Plc
Foreign currency senior unsecured rating: affirmed at 'CCC'; Recovery Rating of 'RR4'
Foreign currency senior unsecured rating: affirmed at 'CCC (EXP)'; Recovery Rating of 'RR4'

Ferrexpo is an exporter generating hard currency revenues. None of the company's operations are located in the conflict zone. Ferrexpo has an adequate liquidity position and is currently seeking to extend the maturity of 2016 notes via an Exchange Offer.

Please see Fitch Affirms Ferrexpo plc at 'CCC' dated 11 February 2015 at www.fitchratings.com for Key Rating Drivers and Rating Sensitivities