S&P lowers Evraz outlook to negative

Standard & Poor's said it revised its outlook on Evraz Group SA and its core subsidiary Mastercroft Ltd. to negative from stable following the announcement of Evraz's intention to acquire Oregon Steel Mills, Inc. (not rated) for a total cash consideration of $2.3 billion.

At the same time, the BB- corporate credit and senior unsecured debt ratings, as well as the ruAA- Russia national-scale rating on Evraz and Mastercroft were affirmed, the agency said, adding that the outlook revision reflects its expectation that Evraz's financial profile will deteriorate as a result of this mostly debt-financed acquisition and that Evraz's flexibility under the existing rating will be materially reduced.

S&P added that the rating on Evraz reflects its position as a commodity manufacturer in a cyclical industry, exposed to the institutional risks of Russia and dependent on the export of semifinished products, rather ambitious investment strategy and resulting debt increases, noting that the key positive rating factors are the group's high profitability and cash flow, supported by its low cost position and vertical integration.

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