Standard & Poor’s Ratings Services has left the counterparty credit ratings and outlook on Menatep St Petersburg (MSPb, CCC+/Developing/C) unchanged as a result of ongoing legal and tax allegations against fellow Group Menatep company OAO NK Yukos (Yukos, BB/WatchNeg/–), its core shareholders, and employees. On September 2, 2003, the outlook on MSPb was changed to developing from stable on Standard & Poor’s concerns over the impact of the arrest of the chairman of the board of directors and an owner of MSPb, Platon Lebedev, who is also a beneficial owner of Yukos.
The current ratings are consistent with MSPb’s credit risk profile and the threats that face the broader Menatep group and some of its owners. The developing outlook reflects the fact that the ratings could be raised or lowered depending on the resolution of the affair. Standard & Poor’s will continue to closely monitor developments and any significant changes in the bank’s financial policy, strategy, and ownership, and the effects those changes have on the bank’s credit quality.
Standard & Poor’s Ratings Services has placed its ‘BB’ long-term corporate credit rating on Russian oil company OAO NK Yukos on CreditWatch with negative implications. In a related action, Standard & Poor’s revised the CreditWatch implications on its ‘B+’ long-term corporate credit rating on Russia-based OAO Siberian Oil Co (Sibneft, 92% owned by Yukos) to developing from positive.
“The CreditWatch actions reflect our concern that the recent freezing of the 44% stake in Yukos indirectly owned by the company’s CEO, Mikhail Khodorkovsky, and several other people raises the risks for creditors by threatening the ownership rights and governance processes of both Yukos and Sibneft,” says Standard & Poor’s Moscow-based analyst Elena Anankina.
The share-freezing adds to the uncertainty caused by the ongoing legal and tax allegations against Yukos and its core shareholders, as well as by the recent arrest of Khodorkovsky. It also raises general concerns about the poor protection of ownership rights in the Russian Federation, where the political and legal environment remains opaque and unpredictable, and where enforcement of legislation and regulations appears increasingly selective.
“Resolution of the CreditWatch status of both Yukos and Sibneft will require an assessment of the risks to governance, finance, and operations caused by the General Prosecutor’s investigation and tactics. We will focus our analysis in particular on the extent of interference with Yukos’ and Sibneft’s management, and on the companies’ ability to control their financial and other assets,” adds Anankina.
Areas of concern include oil-field licenses; ownership of key operating subsidiaries; tax charges; access to financial markets; liquidity; and any changes to both companies’ financial policy and shareholding and management structures.
Upon completion of the merger, the rating on Sibneft will be based on that on Yukos (to be renamed YukosSibneft) and on the standing of Sibneft’s creditors relative to those of the parent company.