Fitch rates PhosAgro notes BB+

Fitch Ratings said it assigned a long-term foreign-currency issuer default rating of BB+ to OJSC PhosAgro, along with a foreign-currency short-term issuer default rating of B, foreign-currency senior unsecured rating of BB+, local-currency long-term issuer default rating of BB+, local-currency senior unsecured rating at BB+ and national long-term rating at AA(rus).

The outlook is stable.

The agency also said it assigned an expected BB+ foreign-currency senior unsecured rating to Phosagro Bond Funding Ltd.'s proposed loan participation notes.

The outlook is stable.

In the longer term, Fitch said the concentrated supply structure of phosphate rock and the depletion of phosphate rock deposits held by some producers will provide greater pricing power to the remaining phosphate rock producers given the relatively inelastic and increasing demand for phosphates.

PhosAgro's vertically integrated business model with access to local low-cost feedstock contributes to the company's low operating costs position compared to its competitors, the agency said.

But PhosAgro, along with other Russian corporations, does face the potential for natural gas prices to increase in the coming years at a higher rate than general inflation. This may negatively affect the company's margins, although Fitch noted that the company may be able to partially offset this with improvements in gas consumption efficiency at its ammonia plants.

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