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Moody's Investors Service has downgraded the senior implied and issuer ratings of YUKOS Oil Company from Ba1 and Ba2 to B1 and B2 respectively. The move came after a Russian court ruled to freeze the company’s assets last week, at the request of the tax authorities who are claiming $3.5bn in unpaid taxes from YUKOS. According to Moody's, this ruling results in considerable additional financial pressure on the company.
The rating agency is keeping the ratings under review for possible further downgrade. At the same time, Moody's points out that YUKOS continues to generate large cash flows and coverage relative to its debt position. For these reasons, even if the company were forced into insolvency, Moody's believes that creditors would likely remain protected and achieve full recovery.
Another rating agency, Standard & Poor's Ratings Services, lowered its long-term corporate credit rating on YUKOS to 'CCC' from 'BB-', the court decision to ban it from selling or pledging assets, except for products, in connection with a $3.5bn tax claim that YUKOS is challenging in court.
The ratings on YUKOS remain on CreditWatch, where they were placed on October 31, 2003, but the implications have been revised to developing from negative. The Russia national scale rating on YUKOS was lowered to 'ruB' from 'ruAA-'.
In a related action, Standard & Poor's also lowered its long-term corporate credit rating on the Russian oil company Sibneft to 'B' from 'B+', following the court decision to freeze YUKOS's assets, including the company's 92 percent stake in Sibneft. The rating remains on CreditWatch with developing implications, where it was placed on October 31, 2003. The Russia national scale rating on Sibneft was lowered to 'ruA-' from 'ruAA-'.
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