The agency's subsequent press release affirmed that both ratings have remained at the above levels.
The agency's decision followed the Ontario District Court's verdict of March 30, 2005. The court allowed the Canadian steel maker Stelco Inc., a takeover target, to seek extra sources of investment, which makes the planned acquisition of Stelco by Severstal highly improbable, the press release points out.
Fitch has also affirmed the B+ rating of Severstal's $375 million worth of priority unsecured bonds, excluding those from the Rating Watch list with a "negative" implication. The lookout for all Severstal's ratings is "stable."
In November 2004, Fitch placed Severstal's corporate credit rating on Rating Watch list with possible negative implications due to the agency's belief that acquisition of Stelco's assets might have a negative impact on Severstal's financial standing.
Earlier that month, Stelco's board of directors had declined Severstal's offer to buy out the company's assets. In case the takeover plan went through Severstal would undertake financial obligations totaling $869 million, including refinancing of the secured liabilities as well as redemption of unsecured bonds and payments to Stelco's creditors.
Fitch experts point out that the dominant share (about 81 percent) of rolled steel in Severstal's overall output is a favorable factor in assessing the company's performance as rolled steel keeps yielding high profit.
The company's high profit-earning capacity is another positive factor. Severstal's high profitability however may be seriously dented in future by rising costs once the current natural gas price peg for Russia's industrial enterprises is lifted and railway sector regulations liberalized.
