Standard & Poor's Ratings Services 
said today it had lowered its long-term foreign currency corporate credit 
ratings on Ukraine-based agribusiness company UkrlandFarming PLC to 'CCC+' 
from 'B-' and affirmed the 'B-' long-term local currency rating. The outlook 
is negative.

We also lowered our issue rating on the company's senior unsecured notes to 
'CCC+' from 'B-'. The recovery rating on these notes remains at '4', 
indicating our expectation of average (30%-50%) recovery in the event of a 
payment default.

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

We believe that Ukraine's deteriorated creditworthiness increases the 
likelihood that the government will enact laws mandating export companies to 
convert their hard currencies, which could affect the group'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 tax refunds can lead to 
working capital outlays and additional debt. 

The rating reflects our assessments of UkrLandFarming's business risk profile 
as "vulnerable" and its financial risk profile as "intermediate."

We base our view of UkrLandFarming's weak business risk on the company's 
exposure to supply and demand of commodity-type products within the volatile 
agribusiness industry. In addition, the company generates its revenues and 
earnings within Ukraine, where all its operating assets are located. We 
consider the company's exposure to Ukraine as a key risk factor. We view 
UkrLandFarming's corporate governance as "weak," owing to the dominance of its 
owner and CEO, Oleh Bakhmatuk, the lack of independence of the board of 
directors, and material related-party transactions. There is also limited 
information as to the credit quality of the private financial institutions and 
other assets owned by Mr. Bakhmatyuk.

UkrLandFarming's solid market positions in its key business segments and its 
overall position as a large agribusiness player in Ukraine underpin its 
business risk profile. The company has built a track record of profitable 
growth since its inception in 2008. UkrLandFarming maintains a high EBITDA 
margin at about 40%, through economies of scale and relatively low costs.

In our financial risk profile assessment, we integrate our view that the 
company will continue to maintain an aggressive financial policy with 
substantial negative free operating cash flow (FOCF), given its 
growth-oriented strategy and acquisitive nature. Total sales stood at €995 
million by June 30, 2013, versus $60 million in 2009, following a series of 
acquisitions. UkrLandFarming is also increasing the scale of its investments 
to generate organic growth, which could, in our view, be difficult to sustain. 
We factor in our view of the company's liquidity, which we consider to be less 
than adequate, based on our estimate of the ratio of expected liquidity 
sources to uses over the next year at close to 1x. UkrLandFarming has 
meaningful debt maturities over the next several years.

We expect UkrLandFarming's revenues in key business segments--crops and eggs 
at subsidiary AvangardCo--to continue increasing over time. We forecast sales 
exceeding $2 billion in 2013. We believe the company will generate further 
sales growth through higher volumes, notably through rising export volumes in 
the crops segments and at AvangardCo, and a relatively favorable pricing 
environment for UkrLandFarming's key agricultural products, such as corn. The 
likely increase in UkrLandFarming's export volumes will, in our opinion, 
broaden the geographic diversity of its operating income.

We forecast that UkrLandFarming's EBITDA margins will remain generally healthy 
over the next few years, with a stable EBITDA margin in 2013 and a moderate 
contraction in 2014-2015. This slight decline will likely occur because of 
rising input costs, stemming from rising inflation, and a negative shift in 
the product mix as the company expands some of its lower-margin businesses, 
including its distribution segment. We assume selling and administrative costs 
will increase in line with sales growth over time. In our base case, we don't 
anticipate substantial Ukrainian government intervention or more restrictive 
trade policies with key partner exporting countries, although we continue to 
consider these factors as main risks.

We believe FOCF will have remained negative in 2013, given the company's 
still-high capital spending of more than $700 million that year by our 
estimates, and following negative FOCF since the company was founded in 2008. 
We believe in 2014 FOCF might become positive because the company plans to 
gradually reduce its growth investments down to about $400 million, while its 
cash flows continue to grow.

UkrLandFarming's credit protection measures are generally solid. We forecast 
that credit metrics will remain relatively stable, including in particular 
total debt to EBITDA of about 2x in 2013-2014.

The negative outlook on UkrlandFarming takes into account our negative outlook 
on Ukraine and reflects the possibility of a further downgrade over the next 
12 months. This could happen if there were tighter currency controls, more 
restrictions on transfer of funds, or rising political or fiscal pressure.

Standard & Poor's