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Russian Corporates Downgraded To 'CCC-' After Similar Action On Sovereign; Ratings Placed On CreditWatch Negative

  • On March 3, 2022, S&P Global Ratings lowered its foreign and local currency sovereign credit ratings on Russia to 'CCC-/C' from 'BB+/B' and 'BBB-/A-3', respectively. We also revised downward our transfer and convertibility assessment to 'CCC-' from 'BBB-'. The ratings remain on CreditWatch with negative implications, where we placed them on Feb. 25, 2022.
  • The sovereign downgrade reflects the consequences of Russia's military conflict with Ukraine, which has prompted a new round of G7 government sanctions, including ones targeting the foreign exchange reserves of The Central Bank of Russia (CBR). This has rendered a large part of these reserves inaccessible, undermining the CBR's ability to act as a lender of last resort and impairing what had been--until recently--Russia's standout credit strength: its net external liquidity position.
  • To mitigate the resulting high exchange rate and financial market volatility, and to preserve remaining foreign currency buffers, Russia's authorities have--among other steps--introduced capital-control measures that we understand could constrain nonresident government bondholders from receiving interest and principal payments on time.
  • We also believe that virtually all rated corporates and utilities companies in Russia are directly affected by uncertainties around their technical ability to make timely debt payments to all creditors due to the measures imposed by the Russian authorities, irrespective of their financial capacity to pay.
  • As a result, we downgraded 52 Russian corporates and utilities companies to 'CCC-', the same level as the foreign currency rating and the transfer and convertibility assessment on Russia, to reflect the heightened sovereign risk for all Russian corporate issuers. At the same time, we placed all our issuer credit and issue ratings on these companies on CreditWatch with negative implications.

NEW YORK (S&P Global Ratings) March 7, 2022--S&P Global Ratings said today that it downgraded 52 Russian corporates and utilities companies to 'CCC-', the same level as the foreign currency rating and the transfer and convertibility assessment on Russia, to reflect the heightened sovereign risk for all Russian corporate issuers. At the same time, we placed all our issuer credit and issue ratings on these companies on CreditWatch with negative implications (see ratings list).

The downgrade of these 52 Russian corporates and utilities companies follows the imposition of measures that we believe will likely substantially increase their risk of default. Among these are capital controls introduced by authorities that aim at shielding the ruble from the impact of severe economic sanctions while preserving remaining useable reserve buffers. The new G7 government restrictions were imposed on Russia in response to its military actions in Ukraine. We understand from public information and press reports that capital-control measures entail the ban on cross-border financial flows, including debt service payments of both the private sector and the government. We believe this will very likely restrict the ability of nonresident domestic and foreign currency bondholders to receive interest and/or principal payments on time.

Therefore, today's rating actions reflect our view of the uncertainties for virtually all rated Russian corporates and utilities companies, whether they are government-related entities or privately owned companies, around their technical ability to make timely debt payments (interest and/or principal) to all creditors and in full, due to measures imposed by the Russian government, irrespective of their financial capacity to pay.

Below is the list of all the affected companies and their subsidiaries.

CreditWatch

The CreditWatch negative placement on all the affected entities indicates that we could lower the ratings further over the next few weeks. We expect to resolve the CreditWatch placement once we have more clarity on the technical ability and/or willingness of the companies to honor their debt obligations to all creditors in full and on time.

Related Criteria

Ratings List

Downgraded; CreditWatch/Outlook Action
To From

LUKOIL PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB/Stable/--

ALROSA PJSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

Gazprom PJSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

Gazprom Capital OOO

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Gazprom Neft PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Rosneft Oil Co. PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Rosneft International Holdings Ltd.

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

Magnitogorsk Iron and Steel Works PJSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

Transneft PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Severstal PAO

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

MMC Norilsk Nickel PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

TMK PAO

Issuer Credit Rating CCC-/Watch Neg/-- B+/Negative/--

NLMK PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

NOVATEK PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB/Stable/--

Eurasia Drilling Co. Ltd.

Issuer Credit Rating CCC-/Watch Neg/C BB+/Stable/B

Holding Co. Metalloinvest JSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

EvrazHolding Finance LLC

Issuer Credit Rating CCC-/Watch Neg/C BB+/Stable/B

PhosAgro PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Petropavlovsk PLC

Issuer Credit Rating CCC-/Watch Neg/-- B-/Stable/--

Sibur Holding PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

EuroChem Group AG

Issuer Credit Rating CCC-/Watch Neg/-- BB/Stable/--

Polyus PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Evraz PLC

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Corporation VSMPO-AVISMA PSC

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Rostelecom PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Mosenergo PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Mobile TeleSystems PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Sistema (PJSFC)

Issuer Credit Rating CCC-/Watch Neg/-- BB/Positive/--

Federal Grid Co. of the Unified Energy System

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

Russian Railways JSC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

MegaFon PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Sovcomflot PAO

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

X5 Retail Group N.V.

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

X5 Finance OOO

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Vodokanal St. Petersburg

Issuer Credit Rating CCC-/Watch Neg/C BB+/Stable/B

Etalon LenSpetsSMU JSC

Issuer Credit Rating CCC-/Watch Neg/C B-/Positive/B

RusHydro PJSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

Rosseti Moscow Region PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Rosseti Centre, PJSC

Issuer Credit Rating CCC-/Watch Neg/C BB+/Stable/B

Mosvodokanal JSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

Atomic Energy Power Corp. JSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

ER-Telecom

Issuer Credit Rating CCC-/Watch Neg/-- B+/Stable/--

Magnit PJSC

Issuer Credit Rating CCC-/Watch Neg/-- BB+/Stable/--

Katren JSC SPC

Issuer Credit Rating CCC-/Watch Neg/C BB+/Stable/B

Rosseti PJSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

DeloPorts LLC

Issuer Credit Rating CCC-/Watch Neg/-- B+/Stable/--

TransFin-M PC

Issuer Credit Rating CCC-/Watch Neg/C B/Negative/B

SCF Capital DAC

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--

TGC-1 PJSC

Issuer Credit Rating CCC-/Watch Neg/C BBB-/Stable/A-3

Setl Group LLC

Issuer Credit Rating CCC-/Watch Neg/C B+/Positive/B

Leader Invest JSC

Issuer Credit Rating CCC-/Watch Neg/C B-/Positive/B

Yandex N.V..

Issuer Credit Rating CCC-/Watch Neg/-- BBB-/Stable/--
All ratings are foreign currency ratings.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352 Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; or Stockholm (46) 8-440-5914

Analytical Group Contact:Corporate and IFR EMEA;
RatingsCorpIFREMEA@spglobal.com

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