31 May 2004 03:17
Sibneft CreditWatch implications revised to neg
MOSCOW. May 31 (Interfax) - Standard & Poor's Ratings Services revised the implications of the CreditWatch
status of its 'B' long-term corporate credit rating on the Sibneft oil company to negative from developing,
the agency said in a news release.
The revision reflects Standard & Poor's concerns about potential implications for Sibneft of the fiscal and
legal pressures on Sibneft's 92% shareholder, Yukos (CCC/Watch Neg/--). These have been mounting following the
court decision on a $3.4 billion tax claim against Yukos (subject to an appeal) and a freeze of the company's
assets (including its 92% stake in Sibneft).
"This raises uncertainty over Sibneft's status in the event of a Yukos default or bankruptcy, further
complicates the reversal of the Sibneft takeover by Yukos, and increases uncertainty over Sibneft's shareholding
structure," said Standard & Poor's credit analyst Elena Anankina. "If Yukos were allowed by the
court--which is not currently the case--to sell its stake in Sibneft (fully or partially) to pay taxes or debt, we would
be concerned that Sibneft might increase its leverage considerably to finance a stock repurchase by the company or its
former shareholders."
The negative CreditWatch implications on Sibneft also highlight Standard & Poor's concerns over the
company's aggressive corporate governance practices and financial policy. Indeed, it is unusual that Yukos, a 92%
shareholder, does not have any effective control over Sibneft's management, assets, or cash flows, as illustrated
by several failures to elect its representatives to Sibneft's board of directors. Although the rating on Yukos does
not act as a formal constraint for Sibneft, this situation illustrates aggressive corporate governance practices, which
put pressure on Sibneft's rating.
The CreditWatch status of Sibneft will be resolved when the company's shareholding structure, financial policy,
and corporate governance practices are clarified. Standard & Poor's will continue to closely monitor the
situation around Sibneft and Yukos. [RU ASIA EUROPE EEU EMRG AAA ENR CRU CORA]
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