London, 07 August 2009 -- Moody's Investors Service has today downgraded
to Caa2 from Caa1 the foreign currency corporate family rating, and
probability of default and debt ratings of NJSC Naftogaz of Ukraine
("Naftogaz") while also placing the ratings on review for possible
downgrade.
The rating action reflects Moody's concerns that recent statements by
government representatives that Naftogaz has been directed to enter into
debt renegotiations with foreign creditors shortly before the scheduled
maturity of the company's USD 500 million notes on September 30th
suggests that the probability of extraordinary government support to
prevent a default should now be classified in the low rather than medium
category. The impact of reducing our government support assumption to low
is to reduce the final ratings to the level of our previous stand-alone
credit assessment which was already at the Caa2 level. The decision
furthermore to place the ratings on review for possible downgrade
reflects the uncertainty over (i) the steps that are now being taken by
the company to respond to this directive in the face of (ii) the limited
visibility over the company's current available liquidity for meeting
maturing debt obligations, in particular, the upcoming USD500 million
notes maturing on September 30th.
Previous rating action on Naftogaz took place on May 29th, 2009, when
Moody's downgraded to Caa1 from B2 the foreign currency corporate family
rating, probability of default and debt ratings of NJSC Naftogaz of
Ukraine ("Naftogaz"). The outlook on the ratings was changed to negative.
As a result of this action, among other factors, the stand-alone credit
assessment as expressed by the baseline credit assessment (BCA) was
reduced to the equivalent of Caa2 reflecting the weakening credit and
liquidity profile of the company in view of its mandate to secure the
purchase of over 19 billion cubic metres (bcm) of gas during 2009 for gas
storage, as well as the increasing uncertainty with regard to Naftogaz's
ability to honor its debt obligations recognizing that Naftogaz was
highly reliant over the short-term on direct state support and/or
third-party financing to meet its operational and financing commitments
The principal methodology used in rating Naftogaz is the "Application of
Joint Default Analysis to Government Related Issuers", published April
2005, which can be found at moodys.com in the Credit Policy &
Methodologies directory, in the Ratings Methodologies sub-directory.
Other methodologies and factors that may have been considered in the
process of rating this issuer can also be found in the Credit Policy &
Methodologies directory.
Headquartered in Kiev, Ukraine, Naftogaz is an integrated hydrocarbon
company with operations in oil and gas exploration and production,
domestic and international transportation, storage and supply. In 2007
the company generated revenue of UAH30.4 billion (USD6.0 billion) and
operating profit of UAH4.5 billion, while arriving at a break-even
profitability at the net profit level.
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