S&P Places Uralkali on Watch for Possible Downgrade (MOS) (POT)

Standard & Poor's Ratings Services said today that it has placed on CreditWatch with negative implications its 'BBB-' long-term corporate credit rating and 'ruAAA' Russia national scale rating on Russia-based potash fertilizer producer Uralkali OJSC.

The CreditWatch placement follows Uralkali's announcement that it has suspended production at its large Solikamsk-2 mine, following a brine inflow. It reflects significant uncertainty on:

• Whether this important mine, representing 17.7% of Uralkali's capacity, will resume operation and, if so, when and to what extent;
• Possible remedies in terms of increased production and capacity at other sites; and
• Associated costs and capital expenditure (capex).

Depending on the resolution of these matters, EBITDA, operating cash flows, and credit metrics could deteriorate from 2015, compared with our previous base case which assumed leverage (debt to EBITDA) reduction. We note that the company has limited leeway at the current rating level, given the low likelihood of material increases in potash prices from 2015, and Uralkali's somewhat weak credit metrics for the rating at end-June 2014.

We aim to resolve the CreditWatch within approximately two months, once Uralkali has completed its ongoing mine investigations, identified potential remedies, and updated its business plan. We will also look at dividends to be paid in

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