S&P cuts Yukos ratings

Standard & Poor's said it lowered its long-term corporate credit rating on Russian oil company OAO NK Yukos to CC from CCC following an order to freeze the company's bank accounts in Russia and announcement of an additional $3.4 billion tax claim being levied against the group for fiscal year 2001.

The rating signals the company's current high vulnerability to default. The rating remains on CreditWatch with negative implications, where it was placed on April 27.

At the same time, the Russian national scale rating on Yukos was lowered to ruCC from ruB.

On Thursday, court officials froze the company's bank accounts in Russia to secure execution of a court order requiring the company to pay Russian ruble 99 billion in back-taxes and penalties for 2000. In addition, the Russian Tax Ministry announced that a second tax claim of a similar amount (RUR98 billion) had been made against the company, this time for fiscal year 2001.

The rating action reflects S&P's concern that the two latest events heighten the risk of a default in the near-term owing to insufficient liquidity to meet all of the company's obligations, given the legal constraints on its ability to raise and pay out cash.

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