• Russian oil pipeline company OAO AK Transneft has announced an open tender for the sale of its 98.9% stake in Russia-based Insurance Co. TRANSNEFT (IC TRANSNEFT).
• We have only limited information about the details of the transaction at this time and are uncertain about the transaction’s impact on IC TRANSNEFT’s prospective capitalization and competitive position.
• We are therefore placing our ‘BBB-‘ long-term and ‘ruAAA’ national scale ratings on IC TRANSNEFT on CreditWatch with negative implications.
• We expect to revise the CreditWatch within the next two-three months, after we receive more information regarding the details of the transaction and when the tender period ends, expected in late September 2013.
Standard & Poor’s Ratings Services said today that it had placed its ‘BBB-‘ insurer financial strength and counterparty credit ratings and ‘ruAAA’ Russia national scale ratings on CJSC Insurance Co. TRANSNEFT (IC TRANSNEFT) on CreditWatch with negative implications.
The CreditWatch placement follows the announcement of IC TRANSNEFT’s ultimate parent, OAO AK Transneft (Transneft), that it plans to sell its 98.9% stake in IC Transneft.
The ratings on IC TRANSNEFT continue to reflect our assessment of its stand-alone characteristics and incorporate one-notch uplift to reflect support from Transneft. We are maintaining the one notch of support despite the disposal plan, given the established and ongoing strong business ties between IC TRANSNEFT and Transneft; all corporate risks of Transneft are insured with IC TRANSNEFT and we believe the parent has incentive to provide continued support during the sales process. We also note that the sales process is in a preliminary stage and the main terms of the sale and whether it will proceed will likely not be known before the fourth quarter of 2013.
The CreditWatch placement also reflects our limited information about the details of the transaction at this time and our uncertainty regarding the transaction’s impact on IC TRANSNEFT’s prospective capitalization and competitive position.
We will monitor the developments relating to the sale of IC TRANSNEFT. We expect to resolve the CreditWatch within the next two-three months, once we have more clarity regarding the details of the transaction, such as structure and terms of the deal, potential acquirers, or whether the sale of the insurer will proceed.
We could affirm or lower the ratings on IC TRANSNEFT following our review. We could remove the one notch of support from Transneft if we considered that the willingness of the parent to provide support had reduced. If the transaction is completed, we would remove the one notch of support because IC TRANSNEFT would no longer belong to Transneft.
The ratings will depend on IC TRANSNEFT’s future ownership and the potential implications of the transaction on the company’s stand-alone characteristics, in particular its future capitalization and competitive position.
