RPT-Fitch: No Rating Impact on UkrLandFarming from Cargill's Minority Buyout

Tue Jan 14, 2014 7:03am EST

Jan 14 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says that Cargill Inc.'s (Cargill; A/Stable) recently announced acquisition of a 5% stake in Ukrlandfarming PLC (ULF; B-/ Negative) is a positive development for ULF, reflecting the interest of a large international commodity trader in the promising Ukrainian agribusiness. However, this development will not lead to a change in ULF's ratings, which remain constrained by Ukraine's sovereign rating (B-/Negative) and a deteriorating business environment in the country.

The transaction was completed through a sale of shares owned by Oleg Bakhmatyuk, a principal shareholder of ULF. We believe that Cargill will not be involved in the management of ULF's operations and has no plans to increase its share in the company in the near future. It is also cash- neutral for ULF as it does not involve a fresh capital injection into the company.

We believe the deal has little impact on ULF's creditworthiness in view of Cargill's modest participation. However, the strategic partnership would bring some operating benefits to ULF, including higher grain trading volumes between parties and more grain exports to China. At the same time, Fitch does not expect synergies from this alliance to affect operating margins materially for FY14. While ULF's foreign currency IDR of 'B-'/Negative remains constrained by Ukraine's Country Ceiling, its local currency IDR of 'B' reflects its strong domestic position as the largest Ukrainian agricultural company, its efficient, scalable operations and moderate financial leverage that is partly offset by fairly weak corporate governance.

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