Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

 

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

Terms of One-Time Website Use

 

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

 

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

 

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

 

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

Moody's downgrades RussNeft to Caa1, concludes review for downgrade; negative outlook

28 Apr 2020

London, 28 April 2020 -- Moody's Investors Service (Moody's) has today downgraded RussNeft PJSC's (RussNeft) corporate family rating (CFR) to Caa1 from B1 and probability of default rating (PDR) to Caa1-PD from B1-PD. RussNeft's outlook has been changed to negative from rating under review. This concludes the review for downgrade initiated by Moody's on 13 March 2020.

RATINGS RATIONALE

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The oil and gas sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment, and oil prices. More specifically, the weaknesses in RussNeft's credit profile have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and RussNeft remains vulnerable to the outbreak continuing to spread, and oil prices remaining low. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Today's action reflects the impact on RussNeft of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered, with a backdrop of weak liquidity.

The downgrade of RussNeft's rating to Caa1 with a negative outlook reflects (1) RussNeft's weak liquidity, which has been amplified by the severe drop in oil prices and aggressive liquidity management, both of which have materially increased the probability of default in the current oil price environment; (2) Moody's expectation that the company's credit metrics will materially deteriorate over the next 12-18 months because of the continuing drop in oil prices and anticipated production cuts under the new OPEC+ agreement, with limited potential for recovery over the following 12-18 months; and (3) the company's elevated corporate governance risks stemming from substantial related-party transactions with other businesses of the Gutseriev family which controls 46.5% of RussNeft's voting shares.

As of 31 December 2019, RussNeft's liquidity comprised cash and cash equivalents of RUB3.0 billion, and operating cash flow of below RUB10 billion which Moody's expects the company to generate over the next 12 months assuming the average oil price for 2020 at $25 per barrel of Urals. This liquidity will be insufficient to cover the company's debt maturities of RUB7.2 billion (including lease payments) over the same period, capital spending which Moody's estimates at up to RUB19 billion and dividend payouts of at least $60 million on the company's preferred shares, as anticipated by its dividend policy.

RussNeft's borrowings mostly comprise a loan from Bank VTB, PJSC (VTB, Baa3 stable), which represents around 92% of the company's debt portfolio. RussNeft is to repay the outstanding $1.17 billion loan in quarterly instalments totalling $91 million per year in 2020-25 and a $625 million final payment in 2026.

Moody's expects that in 2020 RussNeft's leverage will increase to 8.0x total debt/EBITDA from 3.2x as of year-end 2019; retained cash flow (RCF)/debt will decline below 5% from 24.5%; and EBITDA/interest expense will decline to 3.0x from 6.0x (all metrics are Moody's-adjusted, with Moody's-adjusted debt including a RUB20 billion obligation under a forward contract to purchase RussNeft's shares from VTB signed in late 2019, and around RUB53 billion of financial guarantees issued for related parties). This deterioration in credit metrics will be driven by the imminent decline in EBITDA and operating cash flow because of the drop in oil prices and production cuts under the OPEC+ agreement, along with the likely increase in debt to cover the cash burn. Moody's views the potential for recovery in the company's leverage and RCF/debt in 2021 as limited, as long as its adjusted debt remains inflated by obligations attributed to related-party transactions.

Moody's expects RussNeft's post-dividend FCF to be negative in 2020, driven by high capital spending and committed dividend payouts on preferred shares, which are denominated in US dollar and therefore will increase in rouble terms (the company's reporting currency), amid lower operating cash flow. In 2019, RussNeft updated its dividend policy which now anticipates payouts of at least $60 million per year on its preferred shares, up from $40 million earlier.

RussNeft's rating also factors in (1) amortisation of the company's loans and received prepayments under oil supply contracts, and significant interest expenses; (2) its significant related-party transactions and risks related to its concentrated ownership structure; and (3) the sensitivity of the company's financial metrics to the volatility in oil prices and the rouble exchange rate.

RussNeft's rating takes into account the company's (1) sizeable reserves and sustainable hydrocarbon production absent the OPEC+ restrictions; and (2) historically moderate leverage, robust cash flow metrics and positive free cash flow, although all these will deteriorate on low oil prices and production cuts.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) CONSIDERATIONS

RussNeft is exposed to carbon transition risk in the long term. Oil demand could peak in the next 10-15 years, well before natural gas, which has a central role in the energy transition of power generation away from carbon. The company has a low share of gas in its production and reserves.

Corporate governance risks stem from the company's concentrated ownership structure and substantial related-party transactions, which frequently lack transparency and clear economic rationale. RussNeft's key shareholders are the Gutseriev family (46.5% of voting shares) and Glencore plc (Baa1 stable, 33% of voting shares), with around 20% of ordinary shares in free float on the Moscow Exchange.

RussNeft occasionally provides guarantees for related-party oil supply contracts and borrowings, including those related to the M&A activity of other businesses of the Gutseriev family. As of year-end 2019, RussNeft had RUB60 billion of guarantees issued for and to non-consolidated related parties, which represented 37% of its Moody's-adjusted debt.

In H2 2019, RussNeft's subsidiary Russneft Cyprus Limited signed a long-term forward contract with Business Finance LLC, an affiliate of VTB, to purchase RussNeft's 33.2 million preference shares which Business Finance LLC acquired earlier in the same period, in 2026 for RUB21 billion. In the same period, RussNeft provided a RUB23 billion financial guarantee to Business Finance LLC for Miraholl Holdings Limited, an entity controlled by the Gutseriev family, and a RUB13.5 billion short-term loan to an undisclosed third party, without disclosing details and economic rationale of these transactions.

As of 31 December 2019, RussNeft had a RUB51 billion outstanding balance of legacy loans provided to its related parties, companies of the GEA Group, through which RussNeft participates in oil exploration and production projects in the Republic of Azerbaijan. RussNeft consolidated these loans at the time of the acquisition of significant influence over the GEA Group from a related party in 2014 for $870 million, including cash payment of $9 million. The GEA Group currently does not generate cash flows sufficient to repay these loans.

RATIONALE FOR THE NEGATIVE OUTLOOK

The negative rating outlook reflects uncertainty over RussNeft's ability to materially improve its liquidity in the short term, further elevating the probability of default under its bank debt.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

An upgrade of RussNeft's rating is unlikely over the next 12-18 months, given the negative outlook. Over time, Moody's could upgrade the rating if the company (1) materially improves its liquidity and liquidity management; (2) improves its corporate governance practices and curtails its loans to and guarantees for related parties; (3) improves public disclosure of its related party transactions; (4) maintains its RCF/debt at or above 10%, debt/EBITDA below 5.0x and EBITDA/interest expense above 2.5x (all metrics are Moody's-adjusted).

Moody's could downgrade RussNeft's rating if (1) the company fails to improve its liquidity, increasing the probability of default on its debt obligations, including in the form of debt restructuring which Moody's could view as a distressed exchange, a form of default; or (2) the company's RCF turns negative and EBITDA/interest expense declines below 1.0x on a sustained basis.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Independent Exploration and Production Industry published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1056808. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Moscow, Russia, RussNeft PJSC (RussNeft) is a medium-sized independent oil and gas producer, with key upstream assets located in Western and Central Siberia, and Volga-Urals. As of 31 December 2019, the company had around 1,305 million barrels of oil equivalent (boe) of proved oil and gas reserves in accordance with the Petroleum Resources Management System classification. In 2019, RussNeft produced 7.1 million tonnes (mt) of crude oil and condensate (including 0.5 mt produced by companies of the GEA Group, which is not consolidated by RussNeft) and 2.5 billion cubic meters (bcm) of gas.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Artem Frolov
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Victoria Maisuradze
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.