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Moody's upgrades MMK to Ba1

Moody's on April 26 confirmed the Ba1 corporate family ratingsand Ba1-PD probability of default ratings of three Russian steel and mining companies,OJSC Novolipetsk Steel,or NLMK, PAO Severstaland PJSC MMC Norilsk Nickel.

At the same time, Moody's upgraded the corporate family ratingof OJSC Magnitogorsk Iron & SteelWorks, or MMK, to Ba1 from Ba2 and probability of default to Ba1-PDfrom Ba2-PD. The outlook on all the ratings is negative.

The ratings action has concluded the review started by the ratingservice on March 10 for NLMK, Severstal and MMK while review for Norilsk Nickelstarted Jan. 22. The actionalso follows Moody's recent confirmation of Russia's Ba1 government bond ratingwith a negative outlook.

The confirmation of the ratings of NLMK, Severstal and NorilskNickel reflects the companies' strong business profiles, low-cost position, highprofitability and solid liquidity, which supports their competitiveness in internationalmarkets.

It also reflects Moody's expectation that their financial metricswill remain commensurate with their ratings despite the volatility in prices forsteel and commodities. However, the companies' Ba1 ratings will remain constrainedby Russia's Ba1 sovereign rating with a negative outlook and the Ba1 country ceilingfor foreign-currency debt.

Meanwhile, the upgrade of MMK's rating reflects Moody's expectationthat the company's financial metrics will remain robust as it proceeds with debtreduction plans and will maintain strong operating performance, high profitability,positive free cash flow generation and solid liquidity.

The negative outlook is consistent with negative outlook forthe sovereign rating and reflects the fact that a potential downgrade of Russia'ssovereign rating may result in the lowering of Russia's foreign-currency bond countryceiling, which would result in a downgrade of the companies' ratings.