International credit rating agency Moody’s has announced that it has upgraded the credit rating of Swiss-headquartered resources company Ferrexpo, whose main interests are in Ukrainian iron ore assets, to Caa2 from Caa3, with a stable outlook.
Moody’s stated that the upgrade to Ferrexpo’s rating reflects the company’s improved liquidity profile with a cash balance of $145 million at the end of 2016, due to improved iron ore prices in the last six months, and expectations of strong cash flow generation in 2017-18 with free cash flow of around $250 million in 2017 and $70-100 million in 2018. The rating also reflects a stronger business profile with a better sales mix with 65 percent Fe pellets, which attract higher pellet premiums, accounting for 94 percent of Ferrexpo's production in 2016 compared to 53 percent in 2014.
Moody’s also stated that the stable outlook on Ferrexpo's rating is in line with the stable outlook on Ukraine's sovereign rating and it also reflects the credit rating agency’s expectation that the company will sustain an adequate operating and financial performance, despite high country risks, and maintain adequate liquidity.