Fitch May Cut Rosneft Rating Over 50% TNK-BP Stake Buy

Fitch ratings agency warned on Thursday it may revise downward Russian state-controlled oil giant Rosneft’s credit rating over its plans to buy a 50 percent stake in the TNK-BP joint venture between the British oil giant BP and the AAR group of four Russian billionaire shareholders.

“Rosneft is reported to have agreed to pay $28bn for the 50 percent stake in TNK-BP, which currently belongs to AAR. We would expect to review the ratings of both companies [Rosneft and TNK-BP] if a deal goes ahead, though the outcome is still unclear as no official announcement has been made,” Fitch said.

The Russian oligarchs whose joint venture with BP has been plagued by years of in-fighting have reached a preliminary agreement to sell their stake to Rosneft for about $28 billion, Sky News reported on Wednesday, citing sources.

“They are understood to have signed an outline agreement with Rosneft in Moscow last night,” the channel said.

Fitch’s initial assessment is that Rosneft’s credit metrics provide sufficient headroom to raise up to $15bn of additional debt to partially fund the acquisition “while maintaining its current rating,” the agency said.

“Additional debt well in excess of the $15bn threshold, if coupled with only a limited change to Rosneft’s dividend policy and capex plans, would be likely to result in sustained FFO [Funds from Operations] leverage levels well above 2x and thus a downgrade,” Fitch said.

“In this scenario, we would not expect any downgrade to exceed one notch, which would enable the company to maintain an investment-grade rating. However, if the post-acquisition leverage ratios exceeded 3x, there would be greater pressure on the rating. In this case, Fitch will re-assess the degree of state support and whether it is sufficient to underpin investment-grade ratings.”


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