Moody's downgrades ratings of 95 Russian non-financial corporates

Moody's Investors Service has downgraded the ratings of 95 Russian non-financial corporates, as well as the Baseline Credit Assessments in the case of Government-Related Issuers (GRIs), Report informs referring to Moody’s website.

The companies included Acron, Alrosa, Atomenergoprom, Avtodor, Bashneft, Cherkizovo, DME Limited (Moscow Domodedovo Airport), EuroChem Group AG, Evraz plc, FPC, FGC UES, Gazprom Neft, Gazprom, Global Ports Investments, Inter RAO, Metalloinvest, Lukoil, MMK, Megafon, Nornickel.

The downgrade also affected Mobile Telesystems, NLMK, Nord Gold plc, O1 Properties Limited, Novatek, Severstal, TMK, Koks, Rosneft, PhosAgro, Polyus, Rosseti, RusHydro, Russian Railways, Sibur Holding, Sovcomflot, SUEK, Tatneft, TransContainer, Transneft, Rusal, Uralkali, Veon Holdings, Veon Ltd., VimpelCom, X5 Retail group.

The rating actions follow the sovereign rating action on the Government of Russia which took place on March 6, where Moody's downgraded the Government of Russia's long-term issuer rating and senior unsecured ratings (local and foreign currency) to Ca from B3. Russia's local- and foreign-currency country ceilings were lowered to Caa2 from B2 and B3, respectively.

The downgrade of Russia's ratings was triggered by Moody's expectation that capital controls by the Central Bank of Russia (CBR) will restrict cross border payments including for debt service on government bonds.

Moody's view is supported by a reported statement from the National Settlement Depository (NSD) that coupon payments on OFZ government bonds due on March 2 have only been paid to local holders of the papers, citing the CBR order prohibiting payments to non-residents. The downgrade to Ca was hence driven by severe concerns around Russia's willingness and ability to pay its debt obligations.

Moody's view is that the risk of a default occurring has significantly increased and that the likely recovery for investors will be in line with the historical average, commensurate with a Ca rating.

While liquidity alone was not the main driver for these actions, the intensifying pressures on the domestic banking system and rising risk of international banks distancing themselves from Russian issuers may threaten the reliability of previously committed liquidity lines.

“We will continue to monitor issuer-specific liquidity and issuers' own responses to this changing environment, with liquidity risk a possible driver of future rating actions,” reads the message.