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Standard & Poor’s Ratings Services has assigned its ‘B+’ rating to the US$1.75bn senior unsecured 10-year loan participation notes to be issued on a fiduciary basis by Morgan Stanley & Co International Ltd for the sole purpose of financing a loan with matching terms and conditions to Russia-based OAO Gazprom, the world’s largest gas company.

The debt rating mirrors Standard & Poor’s corporate credit rating on Gazprom (B+/Positive/–), which takes into account the company’s role as the owner and operator of essentially all exploration, production, processing, transportation, and export assets in Russia’s natural-gas sector, as well as its privileged position as a supplier to the large and growing Western European market.

“The rating on Gazprom remains constrained by the continuation of a strongly adverse domestic pricing regime, as well as by the company’s high financial leverage, high short-term debt, dependency on

  • Ukraine for access to export markets, and expected major capital-expenditure requirements to maintain production and the export-pipeline infrastructure,” says Eric Tanguy, a Standard & Poor’s credit analyst.

    The proceeds from the bonds will be used to fund part of Gazprom’s significant capital-expenditure programme.