(Repeat for additional)
July 17 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has downgraded Agroton Public Limited’s (Agroton) Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘C’ from ‘CCC’ and National Long-term rating to ‘C(ukr)’ from ‘BB-(ukr)'. The agency has also downgraded Agroton’s senior unsecured rating to ‘C’/‘RR4’ in relation to its USD50m Eurobond due in July 2014. All ratings are removed from Rating Watch Negative (RWN).
The downgrade reflects the company’s announcement that it is unable to make the payment of its USD3m coupon due on 14 July 2013 due to its inability to access its cash and that it has asked bond-holders to consider a proposal to restructure the terms of the USD50m Eurobond.
The proposed terms of the restructuring include reducing the coupon from the current 12.5% to 8.0% and extending its maturity from July 2014 to January 2019. Given that the revised terms would result in the imposition to bond-holders of a material reduction in terms vis-a-vis the original contractual terms and the restructuring is being conducted to avoid bankruptcy, Fitch would consider it as a Distressed Debt Exchange (DDE).
The company’s main bank account, where its cash is lodged, is with Bank of Cyprus (RD/Viability Rating: f) which itself is currently undergoing a restructuring. This is affecting Agroton’s liquidity position.
Additionally, the company reported that its operating performance is likely to further deteriorate in 2013, driven by adverse weather conditions in Lugansk region, which negatively affected crop yields and a drop in the prices of its crops - wheat and sunflower.
Please see “Fitch Downgrades Agroton to ‘CCC’; on Rating Watch Negative”, dated 2 May 2013 at www.fitchratings.com for further details on the company’s profile and key rating drivers.
Negative: Future developments that could lead to negative rating action include:
- Following the expiry of the 30 days grace period after the missed interest payment on 14 July, lack of visibility over a debt restructuring would trigger a downgrade to ‘D’
- Agreement of a restructuring of the USD50m bond at new terms that constitute, based on Fitch’s methodology, a DDE, would result in a downgrade to RD.
Positive: Until Fitch has clarity on Agroton’s ability to service its debt and maintain a viable business performance, we do not envisage any positive rating movements within the next few months.