The rating remains at BB with a stable outlook, and at ruAA on the Russian scale, after NLMK's announced it would acquire Russian coke producers Altai Koks and Prokopienskugol.
"The ratings on NLMK already factored in further vertical integration through acquisitions of raw material suppliers. These acquisitions will enable NLMK to be self-sufficient in coke, and the combined purchase price of $750 million - in addition to assumed debt and possible capital expenditure considerations - is unlikely to weaken its strong credit metrics. Before the acquisition, NLMK had about $2 billion in cash and no debt. It generated free operating cash flow of about $760 million in the first nine months of 2005, on the back of favorable steel prices," the agency said.
NLMK, a major global steel company, produces pig iron, slabs, hot-rolled, cold-rolled, galvanized, pre-painted and grain- and non-grain-oriented steel. In 2004, the company produced 14% of Russia's steel.
NLMK announced earlier on Wednesday that it had agreed to acquire an 82% interest in Altai-koks, a leading coke-chemical plant, and a 100% interest in holding company Kuzbass Asset Holdings Limited, Gibraltar, which owns 100% in the Prokopievskugol Coal Company for around $750 million. The acquisition will be financed using the company's existing cash funds.
