It is reported that Poltava Iron Ore took a USD 300 million loan from its parent Ferrexpo on Mar 29. According to the company release, the 5 year loan bears an interest rate of 11% and will be used to fund regular operational activity.

According to Millennium Capital analyst “The news is NEGATIVE for PGOK. The annual interest payment on the loan will amount to USD 33 million which is roughly a third of the net profit generated by PGOK in FY10 and this fact should substantially reduce the profit outlook for FY11. Operationally, we see no advantages from the loan unless it goes towards CAPEX financing which, however, contradicts the publicly announced purpose of the facility. All in just another point to be skeptical on the stock.”

(Sourced from Millennium Capital)