Standard & Poor’s Ratings Services has kept its ‘BB-‘ corporate credit ratings on Russia-based gas company OAO Gazprom and its ‘B’ corporate credit ratings on state-owned oil company OJSC Oil Company Rosneft on CreditWatch with developing implications.

Gazprom and Rosneft remain on CreditWatch following the announcement that the Russian government plans to acquire a direct majority stake in Gazprom in exchange for 100% of Rosneft shares but not including Yugansneftegas (Yugansk). Yugansk is the former subsidiary of the distressed oil company Yukos (D/–/–) and was acquired by Rosneft in December 2004 for US$9.3bn. Yugansk will become a separate state-owned company following the government’s purchase of the majority stake in Gazprom.

“The CreditWatch reflects the uncertainty concerning Gazprom’s and Rosneft’s future exposure to liabilities associated with the Yugansk acquisition and the legal and financial details of the Yugansk separation from Rosneft,” says Standard & Poor’s credit analyst Elena Anankina.
Yugansk was acquired for US$9.3bn (which is likely to be financed mostly by secured and short-term debt), is subject to large tax claims and litigation risks, and is a guarantor on US$1.4bn of Yukos’ debt.

The ratings on Gazprom were initially placed on CreditWatch with developing implications on November 30, 2004, following the company’s announcement that it intended to bid for Yugansk. On December 24, 2004, the ratings on Rosneft were also placed on CreditWatch with developing implications, following Rosneft’s announcement that it had become the effective owner of a 76.8% stake in Yugansk, while Gazprom’s CreditWatch status was maintained, reflecting the Russian government’s plan to acquire a direct controlling stake in Gazprom by swapping Rosneft for Gazprom’s treasury stock.

“The resolution of the CreditWatch on Gazprom and Rosneft is subject to the implementation of the proposed merger,” adds Anankina. “Resolution of the CreditWatch on Rosneft will also require clarification of the future status of Rosneft’s liabilities in Gazprom’s corporate structure.”