S&P reduces Evraz Group’s rating

24 February 2010 (07:07)

Standard & Poor’s decreased Evraz Group’s rating from B+ down to B, with Stable Rating Outlook.
‘The decrease in ratings is a sign that the agency believes Evraz to be entering a period of operational weakness for the next couple of years due to the steel industry’s dramatic downfall,’ says the agency’s credit analyst Alex Herbert. S&P expects the company to remain heavily in debt (stemming from some earlier acquisitions) and to have limited cash generation.

The agency feels Evraz Group’s profits and cash flow will gradually restore as the steel market slowly comes back to life. However, the global economy is still far from stable growth, so it’s difficult to predict the future sales and prices of steel.

S&P believes Evraz’s rating can be further reduced by shot-term debt refinancing problems or limited financial covenant opportunities. On the other hand, the ratings could go up if the company managed to solve its liquidity problems and to improve its lending parameters.

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