Moody’s puts ratings of Rosneft and TNK-BP under review during takeover

RIA Novosti / GrigorySyisoev
US-based Moody's rating agency has placed ratings of Russia’s oil major Rosneft and Anglo-Russian JV TNK-BP on review for downgrade as Rosneft announced plan to buy 100% of TNK-BP for as much as $45 billion in cash.

­Moody's pointed out that its decision “reflects the considerable scale of the proposed transactions” associated with the deal. “The review will focus on the various execution steps that are required ahead of the conclusion of the transaction, as well as the impact the transaction will have on the stand-alone profiles of both companies, including their financial policies and financial flexibility post-completion,” the agency said in a press-release.

However, the deal offers many positives to Rosneft as well as to BP, according to Moody’s. The firm believes the acquisition of TNK-BP will bring Rosneft “an opportunity for efficiencies and cash flow savings as well as new opportunities for the cross-sharing of best practices”.

On Tuesday Igor Sechin, CEO of Rosneft said the takeover of TNK-BP, Russia’s third largest oil producer will bring between $3 billion to $5 billion in synergies from extraction, refining, and sales projects. "This will allow us to bring an additional 6 million metric tonnes (6.61 million tons) of oil to market (per year) without addition transport costs," he added.

As for BP, Moody’s considers the transaction "credit positive" as BP will be receiving a huge cash payout for its stake, though it will no longer get dividend payments from TNK-BP. The payout is very important for BP, which faces billions of dollars in fines in the US after the Deepwater Horizon disaster in 2010.

On Monday Rosneft said it would acquire TNK-BP, Russia's third-largest oil producer, through buying the 50% stake from British Petroleum for $17.1 billion in cash and a 12% stake of Rosneft. The deal will leave BP with a 19.75% stake in Rosneft. Earlier Rosneft bought another 50% for $28 billion from AAR consortium of Russian billionaires.