Standard & Poor's Ratings Services
today said it lowered its long-term foreign currency corporate credit ratings
on Ukraine-based agribusiness company MHP S.A. to 'CCC+' from 'B-'.
Simultaneously, we affirmed our 'B-' long-term local currency rating on the
company. The outlook on both ratings is negative.

We also lowered our issue rating on the company's senior unsecured debt to
'CCC+' from 'B-'. Our '3' recovery rating on this debt remains unchanged.

The downgrade of MHP follows the same action on Ukraine and our downward
revision of the country's transfer and convertibility (T&C) assessment to
'CCC+' from 'B-', and takes into account that MHP's core operating assets are
in Ukraine. The revised T&C assessment constrains the foreign currency rating
on MHP because of the likelihood of increased restrictions on foreign exchange
repatriation (changing funds held abroad into local currency) and, more
generally, negative sovereign interaction.

We believe that Ukraine's deteriorated creditworthiness increases the risk of
the introduction of laws instructing export companies to convert their hard
currencies, which could affect MHP's dollar-denominated debt service.

We also believe that weakening sovereign credit quality and political
instability in Ukraine could constrain access to financial markets for
Ukrainian issuers. Increasing taxes or delays in refunds of taxes can lead to
working capital outlays and additional debt. MHP has a bond maturing in the
first half of 2015 and therefore depends on access to capital markets.

We regard MHP's country risk exposure to Ukraine as a key risk factor. MHP
derives over two-thirds of total sales in its domestic market.

MHP has an ambitious expansion strategy, in our view, with related execution
risks, and is exposed to the volatile agribusiness industry. The company has
indicated it is increasing its poultry production capacity to 600,000 tons and
investing in land bank expansion. However, investments are lower than
historical levels, and we understand the company is considering postponing the
start of some of its new construction projects.

We derive our long-term rating on MHP through our 'b+' anchor, reflecting our
assessments of the company's business risk profile as "vulnerable" and its
financial risk profile as "intermediate," according to our criteria. We assess
MHP's stand-alone credit profile (SACP) at 'b', one notch lower than the
anchor, to factor in financial policy risks linked to MHP's expansion.

Our assessment of MHP's business risk incorporates our views of risk in the
global agribusiness and commodity food industry as "intermediate" and country
risk in Ukraine as "very high." MHP's business risk profile is supported,
however, by its leading position in poultry production in Ukraine, and its
track record of profitable growth. The poultry segment, including sunflower
oil production, accounts for more than 70% of sales and earnings. Grain
growing and meat processing make up the remainder. MHP generally maintains
high EBITDA margins of 25%-35% through economies of scale, a vertically
integrated business model, and fairly low raw material, labor, and land lease
costs.

We think MHP's EBITDA will decline in 2013 due to the weak pricing environment
for poultry and grain. We then expect recovery in 2014, owing to a larger land
bank, higher volumes after the completion of MHP's new green-field facility,
and increasing capacity utilization. We forecast that MHP's EBITDA margins
will contract moderately by more than 300 basis points in 2013, and then
stabilize further out.

We based our assessment of MHP's financial risk profile as "intermediate" on
our expectation that the company's leverage (debt to EBITDA) will be at about
3.0x, with its EBITDA interest coverage exceeding 6x. At the same time, MHP is
characterized by inherently volatile free operating cash flow (FOCF), given
the company's growth-oriented strategy. MHP's debt is fully denominated in
foreign currencies, including U.S. dollars and euros. The company has
significant debt maturities over the next few years, and we consider liquidity
to be "less than adequate." Nevertheless, MHP's prudent approach to
refinancing upcoming debt maturities underpins the ratings, in our view.

We forecast that FOCF will turn modestly positive in 2013-2014, following
negative FOCF over the past five years, owing to substantial investments in
capital spending, significant working-capital requirements, and business
growth. MHP is now easing its capital expenditures (capex) after the
completion of the first phase of its new green-field facility, while cash flow
from operations continues to increase. In our forecast, we also factor in
potential acquisitions of up to $400 million after 2014, as well as potential
dividend payments of up to 50% of net income. We think that key credit metrics
will deteriorate as a result of a weaker operating performance in 2013, with a
debt-to-EBITDA ratio, adjusted for operating leases and noncash items, at
about 3.0x in 2013-2014 versus 2.8x in 2012.

The negative outlook on MHP takes into account our negative outlook on Ukraine
and reflects the possibility of a further downgrade of the company in the next
12 months. This could happen if we saw tighter currency controls, more
restrictions on transfer of funds, or rising political or fiscal pressures
that could weigh on MHP's foreign currency denominated debt service.

We would not automatically lower our ratings on MHP if we lowered our ratings
on Ukraine and revised down our T&C assessment. Before considering a
downgrade, we would evaluate the company's ability to show resilience to
country-specific factors, including the risk of stricter currency
restrictions, through stress tests of its liquidity in the event of sovereign
default. We note that MHP benefits from recurrent streams of foreign currency
inflows stemming from exports that somewhat mitigate local T&C issues.

We would revise the outlook to stable if conditions in Ukraine stabilized and
we saw lower risk related to currency controls and repatriation requirements.
Any rating upside is closely linked to a positive rating action on the
sovereign. However, upside could also occur if MHP demonstrated its ability to
continue servicing its foreign currency debt despite the liquidity constraints
stemming from the sovereign debt.

Standart & Poor's