S&P cuts Yukos, Sibneft ratings

Standard & Poor's said it lowered its long-term corporate credit rating on Russian oil company OAO NK Yukos to CCC from BB-, following a court decision to ban it from selling or pledging assets, except for products, in connection with a $3.5 billion tax claim that Yukos is challenging in court.

In addition, the ratings on Yukos remain on CreditWatch, where they were placed on Oct. 31, 2003, but the implications have been revised to developing from negative.

At the same time, the Russia national scale rating on Yukos was lowered to ruB from ruAA-.

In a related action, S&P also lowered its long-term corporate credit rating on Russian oil company Sibneft to B from B+, following the court decision to freeze Yukos' assets, including the company's 92% stake in Sibneft. The rating remains on CreditWatch with developing implications, where it was placed on Oct. 31, 2003.

At the same time, the Russia national scale rating on Sibneft was lowered to ruA- from ruAA-.

"The downgrade and the potential downside of the CreditWatch status on Yukos reflect Standard & Poor's concerns about the increasing risk of Yukos losing ownership rights over its key cash-generating subsidiaries and uncertainties regarding liquidity," said S&P credit analyst Elena Anankina. "There is also mounting political pressure on the company, which might weaken Yukos' position in the tax case; the court hearings are scheduled in May."

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