LONDON, Dec. 21 - Moody's Investors Service has assigned a B3 Corporate Family Rating to VAT Zaporizhstal, one of the leading Ukrainian steel producers. The rating outlook is stable. This is the first time Moody's has assigned ratings to VAT Zaporizhstal.

According to Moody??™s, the B3 Corporate Family Rating reflects: i) the cyclical nature of the steel industry and the sensitivity of financial results to rising raw material and energy prices; ii) the relatively modest size of the company (ranked as the world's 56th steelmaker in terms of tonnage) relative to other rated steel companies; iii) exposure to the iron ore prices and need to secure raw material supply; iv) the significant share of exports and the company's reliance on trading entities (Midland Industries Limited and Airol) owned by the same shareholders as Zaporizhstal for such exports; v) the company's low margins, compared to other rated Russian peers, as a result of the current export distribution structure; vi) the company's exposure to protectionist barriers in the export markets, vii) Zaporizhstal's heavy capital expenditure needs, as the company relies on nine open hearth furnaces; viii) the limited level of shareholder transparency and risk of significant cash outflows to shareholders; ix) the evolving and unpredictable Ukrainian business, fiscal and legal environment.