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S&P: Russian Oil Pipeline Co. OJSC AK Transnefteproduct On Watch Negative After Tender Offer And Consent Solicitation On CLNs

May 28, 2009 "Standard & Poor's"
MOSCOW (Standard & Poor's) May 27, 2009--Standard & Poor's Ratings Services said today that it had placed its 'BB+' long-term corporate credit and 'ruAA+' Russia national scale ratings on Russian oil product pipeline company OJSC AK Transnefteproduct on CreditWatch with negative implications.

The CreditWatch placement follows the announced tender offer and consent solicitation of Transnefteproduct relating to its Russian ruble 2.5 billion credit linked notes (CLNs) issue.

"The CreditWatch placement reflects Standard & Poor's ongoing assessment of what the launch of the offer and consent solicitation indicate about Transnefteproduct's relationship with its parent," said Standard & Poor's credit analyst Andrey Nikolaev.

In our view, the offer and consent solicitation may signal that the company doesn't enjoy the high degree of support from its parent, OAO AK Transneft (BBB/Negative/--), that we had previously factored into the rating on Transnefteproduct. These actions may also signal that financial decision making in Transnefteproduct remains substantially independent from Transneft, contrary to our prior understanding.

We currently follow a top-down approach in assessing Transnefteproduct's credit quality and in deriving its rating, we notch down two notches from the rating on Transneft to reflect expected support.

Transnefteproduct has proposed to the noteholders in its tender offer and consent solicitation:

-- To buy back the bonds at 94% of par plus accrued interest, or
-- To change the maturity date from the original Oct. 12, 2009, to Oct. 12, 2010, and at the same time, increase the coupon on the bonds from the original 8.15% to 11%. In addition, for consents received by June 2, 2009, investors should receive a fee of 5%. Alternatively, a payment of 3% is offered for consents received by June 10, 2009.

According to the tender offer and consent solicitation the decision to change the terms of the notes must be approved by 75% of the noteholders that vote, with the required quorum consisting of more than 50% of all noteholders. If a quorum is not reached, the meeting should be adjourned and, after a period of not less than 13 days, may be reconvened with a minimal quorum requirement.

"Standard & Poor's aims to review the CreditWatch placement by the end of June 2009, after we have finalized our assessment of the degree of Transnefteproduct's integration in Transneft's group, and its independence in taking financial and operational decisions," said Mr. Nikolaev.
Company — Transnefteproduct
  • Full name
    open joint stock company Transnefteproduct
  • Registration country
    Russia
  • Industry
    Transportation