S&P keeps ratings of Lukoil and Uralkali despite Russia's rating downgrade
Currency revenues of those companies will make it possible to continue servicing their foreign currency debts even in case a stress scenario takes place
International ratings agency Standard&Poor's has kept the ratings of two private Russian companies - oil giant Lukoil and potash producer Uralkali - at an investment-grade of BBB-, S&P said. The decision to maintain their ratings was made despite the downgrade of Russia’s sovereign rating to the speculative BB+. The rating above the sovereign one is not usually assigned to companies but S&P methodology provides for exceptions in rare cases.
The agency reviewed ratings of Lukoil and Uralkali as exporters and concluded these companies can sustain the sovereign default and can therefore have higher-than-sovereign ratings.
Currency revenues of those companies will make it possible to continue servicing their foreign currency debts even in case a stress scenario takes place, S&P added.
The agency said huge export revenues in foreign currency and the flexibility of capital expenditures and dividends will enable Lukoil’s servicing of its currency debts even in case of a default in Russia. S&P is nevertheless ready to review its position if the currency liquidity of the oil company declines against growth of short-term liabilities.The credit rating of Uralkali receiving 75% of its revenues from export can also be rated a step above the sovereign rating, the rating agency said. S&P anticipates the potash producer will keep the major portion of its cash in dollars for the period of proactive refinancing of debts maturing in 2015 and 2016. The net debt/EBITDA ratio should drop below 2 as a result, the rating agency added.
S&P set a negative outlook for Lukoil and Uralkali ratings in view of sovereign risks.
S&P included a total of five issuers into the list of Russian exporters with limited exposure of their business to country risks. Further to Lukoil, Uralkali and Norilsk Nickel, these are Novolipetsk Steel (ferrous metallurgy) and FosAgro (fertilizers) benefiting from ruble devaluation.