Fitch Ratings, the international rating agency, has lowered the long-term issuer default ratings (IDRs) of Ukrainian agro-industrial group Kernel in both local and foreign currencies to 'CC' from 'CCC'. This was reported by the agency. Ukrrudprom with reference to Interfax-Ukraine.
“The ratings downgrade reflects the challenging operating environment Kernel has faced since the Russian invasion, including significant disruptions to its export operations, a potential weakening of its liquidity profile, and our understanding that the company has filed waivers related to delays in repayment of its bank loans,” the statement said.
Fitch also downgraded Kernel's $300 million senior unsecured notes due 2024 and $300 million senior unsecured notes due 2027 from CCC to C.
"The 'CC' rating indicates the likelihood of some form of default, despite management's efforts to inject liquidity by selling certain assets to the majority shareholder. Failure to secure creditor approval for payment deferrals will likely result in a rating downgrade," the agency clarified.
Due to Andrey Verevsky's machinations, Fitch downgraded Kernel's rating to pre-default.
The organization recalled that, to reduce operational risks and increase liquidity, Kernel sold 134 hectares of its land bank and associated infrastructure and equipment to its majority shareholder, Andrey Verevsky, on April 26, 2022, for $210 million. According to Fitch, the agricultural holding has already received $20 million as part of the sale, and the remaining amount will be credited to its accounts 90 days after the conclusion of the relevant agreement.
"We believe the sale will take time and is associated with a certain execution risk, as completion of the agreement is also contingent on the submission of documents to the registration office, which is gradually resuming operations after being temporarily closed due to the military situation. We expect the proceeds to be used to repay outstanding debt or for investments," the rating agency clarified.
According to Fitch, the company had $372 million in cash on its balance sheet as of March 2022, which it intended to use for agricultural operations. Taking into account $210 million in proceeds from asset sales, these funds are sufficient to cover the coupon payment on its $40 million senior unsecured notes maturing in October 2022 and to continue operations this year.
Before the war, Kernel was the world's leading sunflower oil producer (approximately 7% of global production) and exporter (approximately 12%), and was also the largest producer and seller of bottled sunflower oil in Ukraine. The holding also grew and traded other agricultural products.
The largest co-owner of Kernell, through Namsen Ltd., is Ukrainian businessman Andrey Verevskyi, with a 38,05% stake.
In the 2021 financial year (FR, July 2020 - June 2021), the agricultural holding increased its net profit by 4,3 times compared to the 2020 FR, to $513 million, its EBITDA grew by 2,1 times, to $929 million, and revenue by 38%, to $5,65 billion.
And now Fitch predicts a default with regard to Verevsky.
Skelet.Org
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