TEXT-Fitch raises OAO Severstal to 'BB' with outlook stable

Aug 6 - Fitch Ratings has upgraded OAO Severstal's foreign
currency Long-term (LT) Issuer Default Rating (IDR) to 'BB' from 'BB-' with a
Stable Outlook. A full list of ratings is at the end of this release.

The upgrade follows clarification of Severstal's potential exposure to Lucchini
SpA following court approval of the company's debt restructuring programme. At
end-2010 (last publicly available data) Lucchini had USD767m of loans, 100% of
which were classified as short term due to breaches of financial covenants of
related loan agreements. Fitch understands that Severstal is not obliged to
issue guarantees in favour of Lucchini's creditors, or provide any kind of
collateral to Lucchini's creditors under the debt restructuring agreement.
Severstal's exposure to Lucchini is currently limited to USD41m of accounts
receivable which were restructured with the same conditions as bank indebtedness
and currently amortise. Severstal will also continue supply Lucchini with raw
materials, iron ore and coking coal until the end of 2014.

The Stable Outlook reflects Fitch's view that Severstal will maintain credit
metrics consistent with a 'BB' rating. Fitch expects Severstal to record a
10%-11% EBIT margin in FY12, based on continuing moderation of steel and steel
raw material prices. The agency expects increase of funds from operations (FFO)
gross adjusted leverage to 3.0x-3.1x by end-2012 (2.0x at end-2011) with further
deleverage to 2.7x-2.8x by end-2014.

Severstal recorded an EBIT margin of 18.5% in 2011, compared to 18.7% in 2010.
The company's surplus capacity in both iron ore and coking coal in Russia
boosted its profitability, as the relative prices of steel raw materials versus
steel products was at a high point in 2011 compared to the past five years.

WHAT COULD TRIGGER A RATING ACTION?
Positive: Future developments that may, individually or collectively, lead to
positive rating action include
- EBIT margin higher than 15% on average and not below 7.5% at any point of the
business cycle.
- Neutral to positive free cash flow generation across the cycle.
- FFO adjusted gross leverage below 1.5x on a sustainable basis.

Negative: Future developments that may, individually or collectively, lead to
negative rating action include
- EBIT margin below 10% on a sustained basis.
- FFO adjusted gross leverage above 3.0x on a sustained basis.

The rating actions are as follows:
LT IDR upgraded to 'BB" from 'BB-'; Stable Outlook
Short-term IDR affirmed at 'B'
Senior unsecured rating upgraded to 'BB' from 'BB-'
Local currency LT IDR upgraded to 'BB' from 'BB-'; Stable Outlook
Local currency senior unsecured rating upgraded to 'BB' from 'BB-'
National LT rating upgraded to 'AA-(rus)' from 'A+ (rus)'; Stable Outlook

Contact:
Primary Analyst
Peter Archbold, CFA
Senior Director
+44 (0) 20 3530 11172
Fitch Ratings Limited
30 North Colonnade
London E14 5GN

Secondary Analyst
Alexei Fadyushin
Director
+7 (495) 956 9901

Committee Chairperson
Frederic Gits
Managing Director
+33 1 44 29 91 84

Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 99 08, Email:
julia.belskayavontell@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20
3530 1103, Email: peter.fitzpatrick@fitchratings.com.

Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable criteria, 'Corporate Rating Methodology' dated 12 August 2011 is
available at www.fitchratings.com.

Applicable Criteria and Related Research:
Corporate Rating Methodology

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