London, 11 December 2012 -- Moody's Investors Service has today downgraded the corporate family rating (CFR) and probability of default rating (PDR) of Ferrexpo Plc to B3 from B2. Concurrently, Moody's has downgraded the ratings on the senior unsecured notes issued by Ferrexpo Finance plc to Caa1 (with a loss-given-default assessment of LGD5, 75%) from B3. The outlook on the ratings is changed to negative from stable.

RATINGS RATIONALE

The rating action follows Moody's decision to lower Ukraine's foreign-currency bond country ceiling to B3 from B1. These ceilings are lower than the local-currency ceiling (B2) as they also capture foreign-currency transfer and convertibility risks. This action also follows Moody's downgrade of Ukraine's government bond rating by one notch to B3 from B2 with a negative outlook.

Key rating drivers behind the sovereign rating action were the following:

1) A downward revision of Moody's assessment of Ukraine's institutional strength;

2) A shortage of external liquidity in Ukraine, which has increased the risk of a currency and wider financial and economic crisis;

3) Ukraine's comparatively weak economic outlook.

For additional information on Sovereign ratings, please refer to the webpage containing Moody's related announcements www.moodys.com/eusovereign. Moody's considers that Ferrexpo's capacity to serve its foreign currency debt could be exposed to actions taken by the Ukrainian government to preserve the country's foreign-exchange reserves. Since all of Ferrexpo's mining operations are based in Ukraine, even though it generates most of its revenues in foreign currencies, Moody's believes that cash flows generated in Ukraine would be exposed to foreign-currency transfer and convertibility risks that are reflected in the B3 ceiling. While Moody's recognizes that Ferrexpo has trading operations and most of its cash balances outside of Ukraine, the rating agency believes they are not sufficient to warrant a rating higher than the sovereign ceiling. Apart from the ceiling constraints, the rating of Ferrexpo appears to be solidly positioned in the rating category with a good financial profile characterized by modest leverage and a good liquidity position, which continue to represent important mitigating factors to the weak business profile of the company due to its high exposure to a single commodity, iron ore, and a single country for all its mining operations, Ukraine.

RATING OUTLOOK

The negative outlook reflects the Ukraine's sovereign rating outlook and the subsequent risk of a further downgrade of the foreign-currency bond country ceiling.

STRUCTURAL CONSIDERATIONS

The one-notch difference between the CFR and the rating assigned to the senior unsecured notes reflects Ferrexpo's balanced capital structure, which includes several pre-export finance and equipment finance facilities, which rank ahead of the unsecured notes and unsecured non-debt obligations of the company. The relatively large amount of higher ranking senior secured liabilities disadvantages the recovery prospects of the lower ranking senior unsecured notes in the event of default. As a result, Ferrexpo's$500 million 7.875% Senior Unsecured Notes due 2016 are rated one notch below at Caa1.

WHAT COULD CHANGE THE RATING UP

Although positive rating pressure is remote at this stage, Moody's believes that the rating could be upgraded if the foreign-currency bond country ceiling is raised and if Ferrexpo maintains a good liquidity position. Furthermore, an improved business profile, characterized by a lower concentration of strategic assets in a single country and location, could also lead to positive rating pressure over time.

The rating outlook could be changed to stable if the operating environment in Ukraine starts to improve, which would be signaled by a stabilization of Ukraine's sovereign rating outlook.

WHAT COULD CHANGE THE RATING DOWN

Downward pressure on the rating could follow further downgrade actions on the sovereign rating and the foreign-currency bond country ceiling. The rating would also come under negative pressure in case of a further material deterioration of iron ore fundamentals, leading to a weaker financial performance and negative free cash flows which would make the liquidity profile of the issuer more fragile.

The principal methodology used in rating Ferrexpo Plc and Ferrexpo Finance plc was the Global Mining Industry Methodology published in May 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Ferrexpo Plc, headquartered in Switzerland and incorporated in the UK, is a mid-sized iron ore pellet producer with mining and processing assets located in Ukraine. The group has the fourth-largest global iron ore reserves behind Vale, Rio Tinto and BHP Billiton. It currently has total Joint Ore Reserves Committee Code (JORC) classified resources of 6.7 billion tonnes, around 1.5 billion tonnes of which are proved and probable reserves. The average grade of Ferrexpo's ore is approximately 31% Fe. In the last 12 months to June 2012, the group generated sales of $1.66 billion and EBITDA of $631 million.

REGULATORY DISCLOSURES

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Gianmarco Migliavacca Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Olivier Beroud MD - Corporate Finance Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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