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Friday, May 6, 2011

AGROTON PUBLIC LIMITED PLANS US$ REGULATION S EUROBOND ISSUE


FITCH AND STANDARD & POOR'S ASSIGNED B- RATING BOTH TO AGROTON AND THE ISSUE


Agroton Public Limited, one of the largest agricultural producers in Ukraine, announced it’s going to issue its debut US$ Regulation S Eurobond notes.

Agroton has appointed VTB Capital plc and Dragon Capital (Cyprus) Limited as the Joint Lead Managers and Jaspen Capital Partners as the Co-Lead Manager to manage its debut US$ Regulation S Eurobond issue.

The investor road-show is expected to commence on 10 May 2011.

The proceeds from the bonds will be used to redeem all existing bank debt of around USD21m, and to fund the construction of additional grain storage facilities, expansion of the Group’s existing land bank and acquisition of additional agricultural machinery as well as for general corporate purposes of the Group. Future cash from the bond proceeds will be deposited initially in Bank of Cyprus (BBB+/Negative Outlook) in USD.

Fitch Ratings has assigned Agroton Public Limited’s planned notes foreign-currency senior unsecured rating of ‘B-(exp)’ and an expected Recovery Rating of ‘RR4’. Agroton has Long-term foreign and local currency Issuer Default Ratings (IDR) of 'B-' and a National Long-term of 'BBB(ukr)'. The Outlook on these ratings is stable.

Today, also Standard & Poor's Ratings Services assigned its 'B-' long-term corporate credit rating to Agroton Public Ltd. The outlook is stable.

At the same time, Standard & Poor's assigned an issue rating of 'B-' to Agroton's proposed senior unsecured notes.

(News taken from Agroton company website:  http://www.agroton.com.ua/en/news-90.htm)

Thursday, May 5, 2011

Warsaw Stock Exchange Creates New Index For Ukrainian Listed Companies

On May 4, the Warsaw Stock Exchange announced a new index WIG Ukraine, comprising 5 listed Ukrainian companies (Agroton, Astarta Holding, Kernel Holding, Milkiland and Sadovaya Group). Additional listed Ukrainian companies may join the index in the near future also, such as Industrial Milk Company (which started trading yesterday) and KSG Agro (starting trading next week).

The WIG Ukraine index requires companies to maintain a free float of at least 10%. The index's revision will be conducted quarterly.

The creation of the new index results from the increased interest shown by Ukrainian firms in the Warsaw Stock Exchange, as well as of the exchange's marketing strategy to attract more Eastern European firms for listing.

For more information kindly see: http://www.warsawvoice.pl/WVpage/pages/article.php/16578/news

Jon M Queen

Fitch assigns B- rating to Agroton, the vertically integrated Ukrainian agriculture company

(News taken from company website: http://agroton.com.ua/ge/news-88.htm)

Fitch Ratings Assigns B- to Agroton

Fitch Ratings has assigned Agroton Public Limited Long-term foreign and local currency Issuer Default Ratings (IDR) of ‘B-’. Fitch has also assigned a National Long-term rating of ‘BBB(ukr)’. The Outlook is Stable.


The Long-term IDRs reflect Agroton’s above-average business risks, due to the strong cyclicality and seasonality of agricultural commodities, its weak free cash flow profile as a result of the large amount of capital tied up in working capital, its reliance on one geographical area in Ukraine and its small size, as illustrated by reported net sales and EBITDA for fiscal year ending December 2010 of USD97.1m and USD38.5m, respectively. These factors are mitigated by the long-term growth prospects for the agricultural sector in Ukraine and Agroton’s high output yields relative to peers and independent farmers.


The ratings also take into account the diversification provided by the livestock division, which mitigates factors such as the volatility in crop production volumes and yields derived from factors which are outside management control, namely adverse weather conditions, cost inflation and/or a sudden decline in selling prices. Agroton's large storage capacity (almost 100% of total grain production), also mitigates sudden changes in selling prices, as it allows the company to sell grain at more convenient prices throughout the year.


Furthermore, management’s commitment to maintain a maximum total debt/EBITDA ratio of 2.0x (throughout the year) and inventories that can be liquidated with relative ease should the need arise, underpins the group’s financial flexibility.


The ratings also reflect Fitch’s expectation of a conservative financial policy, maintaining adequate liquidity reserves while minimising refinancing risk in the longer term. Moreover, the group has accessed equity capital, by way of two equity issues in November 2009 and November 2010, raising USD90m in aggregate, which was used to repay existing debt and fund working capital in the business. Fitch also acknowledges that the company demonstrates better corporate governance procedures relative to other Ukrainian peers, including two independent directors on the board and no related-party transactions.


Although Fitch does not anticipate a positive rating action in the near term, broad guidelines for a ‘B’ local-currency IDR include the combination of larger scale, the ability to fund future capex by internally-generated cash flows, and FFO adjusted leverage between 1.5-2.0x (on a rolling two-year basis), equating to 1.2x-1.6x lease-adjusted gross leverage. Further rating uplift on the ‘B-’ foreign-currency IDR is constrained by lack of sizeable export revenues. Fitch notes that Agroton plans to start exporting directly in H211.

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