Moody’s warns US sanctions may hurt Russia’s Rosneft, Novatek

International rating agency Moody’s sees negative consequences for Russia’s state-owned oil major Rosneft and independent gas produce Novatek borrowings from U.S. sanctions, but keeps the companies’ ratings at Baa1 with a negative outlook and Baa3 with a stable outlook for now, the agency said in a statement on Monday.

“Moody’s views the U.S. sanctions as credit negative for Rosneft and Novatek, particularly if sustained for an extended period. The sanctions will significantly limit both companies’ financing options and could put pressure on development projects, such as Novatek’s Yamal LNG,” the agency said, adding that “both companies’ trade activities currently remain unaffected.”

According to the agency, Novatek “is better positioned to withstand temporary liquidity constraints than Rosneft thanks to its lower leverage and manageable debt maturity profile,” while “Rosneft, in contrast, faces significant debt maturities.” However, both companies generate enough cash flow to repay their debts.

“The credit negative impact would become more pronounced for both Rosneft and Novatek if the E.U. were to impose similar bans on the financing of Russian companies,” the agency said in the statement.

On June 16, the U.S. government imposed sanctions against several Russian banks and companies, including Rosneft and Novatek, banning them from taking mid- and long-term loans in the U.S. on the back of the escalating Ukrainian crisis.

Source: PRIME, 2014

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