Fitch Ratings has affirmed
MHP's ratings affirmation reflect our view that, even after the partial buyback of its maturing 2024 bond, its credit risk remains high. MHP remains challenged by severe operational disruptions from the ongoing Russian invasion in
The ratings assume MHP will continue to be able to refinance its existing short-term credit facilities for its operating needs, while access to new funding is likely to remain limited in the near term.
Key Rating Drivers
Tender Offer Eases Refinancing Risk: MHP - between
The buyback has improved MHP's liability management, easing refinancing requirements but refinancing risk remains high. We estimate that its available cash balance of
Short-Term Financing Availability Key: MHP's operations remain highly reliant on continued availability of working-capital facilities to fund sowing campaigns, and to ensure operational continuity and the ability to export. In light of the latest continued support MHP has received from banks and with most of its credit facilities having been refinanced, we assume the company will maintain access to these facilities to ensure operational continuity to 2026. Liquidity is also supported by a strong cash balance of
Moratorium on Debt Service Unclear:
Disrupted Operations Hit Profitability: We estimate MHP's EBITDA to have declined to
Uncertainty on Export Routes Availability: Since the Russian invasion commercial routes of agricultural products have been severely disrupted as Ukrainian ports in the
Ukrainian Food Security in Focus: MHP's main priority is to provide food for people in
Strong Parent-Subsidiary Links: The Long-Term IDRs of PJSC Myronivsky Hliboproduct, MHP's 99.9%- owned subsidiary, are equalised with those of MHP reflecting our assessment of MHP's 'Medium' operational and 'High' strategic incentives for supporting the subsidiary. This is based on both companies operating with common management and Myronivsky Hliboproduct's strategic importance for the marketing and sales of goods produced by MHP in
We assess legal incentives as 'High' due the presence of cross-default/cross-acceleration provisions in Myronivsky Hliboproduct's major loan agreements and suretyships from operating companies generating a substantial portion of MHP's EBITDA.
Derivation Summary
We have performed a peer comparison to assess MHP versus their peers. However, we acknowledge that MHP's rating is driven by its high credit risks related to the repayment of its upcoming senior unsecured note maturity amid limited access to capital markets and a weak operating environment.
Key Assumptions
Revenue down 2.8% in 2024 on a normalisation in prices, from a 13% growth in 2023
EBITDA margin of around 17% for 2024 to 2026, from an estimated 17.3% in 2023 weighed down by higher logistic and personnel costs
Capex of
No dividends and M&A to 2026
Recovery Analysis
The recovery analysis assumes that MHP would be a going concern (GC) in bankruptcy and that it would be reorganised rather than liquidated; however, this assumption may be revisited depending on how the conflict evolves.
We have assumed a 10% administrative claim. We estimate MHP's GC EBITDA at
We use an enterprise value (EV)/EBITDA multiple of 3.5x to calculate a post-reorganisation valuation and to reflect the heightened operating risks in the region and a mid-cycle multiple. We do not assume MHP's pre-export financing (PXF) facility is fully drawn in our analysis. Unlike a revolving credit facility, a PXF facility has several drawdown restrictions and the availability window is limited to part of the year. PXF facilities are treated as prior-ranking debt in our waterfall analysis. The principal waterfall analysis generates a ranked recovery for the senior unsecured debt in the 'RR5' category, leading to a 'C' rating for senior unsecured bonds. The waterfall analysis output percentage based on current metrics and assumptions is 28%. This is slightly above the previously estimated 20% and reflects the partial senior notes repurchase.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
An upgrade is unlikely at present unless MHP sees improved access to external financing and reduced operating risks along with relaxation of the restrictions on cross-border FX payments
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
Evidence of a default or default-like event including entering into a grace period, a temporary waiver or standstill following non-payment of a financial obligation, announcement of a distressed debt exchange or uncured payment default would be rating-negative
Liquidity and Debt Structure
Limited Liquidity: As of end-2023, MHP had about
MHP has been granted a facility up to
Nevertheless, we continue to assess refinancing risks as high given MHP's weak access to external financing, which is captured by the IDR.
Issuer Profile
MHP is the largest poultry producer and exporter in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
MHP has an ESG Relevance Score of '4' for group structure, reflecting related-party loans. This has a negative impact on its credit profile and is relevant to the rating in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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