S&P: MegaFon on watch

Standard & Poor's said it placed MegaFon's BBB- long-term corporate credit and ruAAA Russia national scale ratings on CreditWatch with negative implications.

The CreditWatch placement follows news that MegaFon paid an extraordinary dividend of $5.15 billion to its shareholders. Another MegaFon shareholder sold its stake in the company to AF Telecom Holding, making AF Telecom a majority shareholder in MegaFon, the agency said.

The CreditWatch placement primarily reflects concerns that MegaFon's increase in debt leverage might not be commensurate with the existing ratings, S&P said.

Before the transaction, the company had significant financial flexibility resulting from its sizable cash balances and low leverage, the agency said.

S&P also said it is concerned about the emergence of AF Telecom Holding as MegaFon's majority shareholder, which might negatively affect its corporate governance practices.

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