TransCapitalInvest DAC
Transneft, PJSC
Credit Opinion: Transneft, PJSC: Update to credit analysis
Credit Opinion: Transneft, PJSC: Update following upgrade to Baa2, outlook changed to stable
Announcement of Periodic Review: Moody's announces completion of a periodic review of ratings of Transneft, PJSC
Moody's rates Transneft's Notes (P)A2
London, 05 June 2007 -- Moody's Investors Service has today assigned a (P)A2 rating to TransCapitalInvest Limited's (TCI Limited) proposed 5-year Loan Participation Notes. The outlook is stable. The rating is equivalent to the senior unsecured issuer rating of OAO AK Transneft (Transneft), given that TCI Limited is issuing the notes for the sole purpose of financing a loan to Transneft and therefore Noteholders are relying solely on the latter's creditworthiness to service and repay the debt. This is the second time TCI Limited issues notes for the same purpose, with Transneft to use proceeds of the respective loan to finance its ESPO Pipeline Project. The final confirmation of the rating is subject to signing of the offering circular and the final decision on the Notes' amount.
Moody's said that while the A2 rating for Transneft incorporates an expectation of high support by the Russian state, the A2 ratings of the company and the proposed notes depend on the stability of the company's BCA. As detailed in the press release dated February 12, 2007, the BCA largely depends on the company's ability to implement its investment projects, in particular the ESPO Pipeline Project, in the way that the company's financial metrics do not fall below the following bands: i) RCF to Net Debt at 15-20%; ii) FFO Net Interest Coverage at 4-6x; iii) Debt to Capital 60-70%; iv) FFO to Net Adjusted Debt 25-40%.
In addition to the February 12, 2007 press release, Moody's points out that the composition of the company's portfolio of investment projects, including time schedules and amounts, is largely influenced by the state and may be adjusted to meet the state's interests. With the ESPO pipeline project being the largest in the portfolio, Transneft may have to simultaneously implement and/or participate in the implementation of a number of smaller projects, with limited ability to influence their timing. Moody's cautions that further material increase in Transneft's investment plans and/or revision of schedules to require a largely increased investment in specific years may put downward pressure on its ratings.
Headquartered in the city of Moscow, OAO AK Transneft is fully controlled by the Russian government (the latter owns 100% of its voting shares) and is the largest crude oil transportation company in the world with its pipeline system of 47 865 km, servicing both Russia's domestic crude oil needs and export operations. In 2006, the company transported crude oil of 458.5 million tons. Its 2006 IFRS sales were RUR202.4 billion (about US$7.7 billion).
Johannes Wassenberg
Moody's Deutschland GmbH
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Ekaterina Botvinova
Vice President - Senior Analyst
Moody's Eastern Europe
Facsimile: +7 495 641-1897