PhosAgro PJSC (PHOR LI): Weakening Credit Metrics on Depressed Fertilizer Prices
Phosagro, the largest standalone fertilizer producer in Europe, has been victimized by the Ruble's appreciation vs the USD and weak fertilizer prices. It appears that the company has been slow to reduce its local currency operating costs, and may be hurt by a prolonged decline in product prices.
Phosagro has 2 bonds outstanding which account for USD1bn of the total USD1.3bn in long-term debt. Phosagro’s USD500-mn LPN 3.95% 11/ 21s (BB+ by Fitch) were priced at 4.5% at issuance with identical terms to the USD500 mn LPN due 2018 (BB+ by Fitch). LPN 3.95% 11/ 21s traded at 101 7/ 16 with a 3.62%YTM at the time of this review (156bps over the 1 7/ 8% US 5Y Treasury due 3/ 31/ 22). In view of the upcoming challenges faced by the company, we are UNDERWEIGHT on both LPNs.