Moody’s Investors Service has today placed on review for downgrade the Ba2 CFR and the Ba2-PD PDR of Bashneft, which is a 74% subsidiary of Sistema.
Moody’s Interfax Rating Agency — majority-owned by Moody’s Investors Service — has today placed on review for downgrade the Aa2.ru national scale rating (NSR) of Bashneft.
Please see the ratings tab on the issuer/entity page on moodys.com for information on the global scale rating.

Ratings rationale

The placement of Bashneft’s ratings on review for downgrade reflects substantial uncertainty and limited transparency over how the company could be affected by the evolving situation regarding the investigation of the Bashneft privatisation by the Investigative Committee of the Russian Federation. The review will be focused on the assessment of any implications of the situation for each company’s business and financial profile.
These rating actions are confined to Bashneft.

What could change the rating up/down

Upward pressure on Bashneft’s ratings is unlikely at present, given the current review for downgrade. Moody’s could confirm the ratings if implications of the investigation were to have no or limited impact on the companies’ business and financial profiles.
Moody’s could downgrade Bashneft’s ratings were there to be material adverse developments in the company’s financial, business and liquidity profile due to (1) uncertainty over the future corporate and shareholder structure; (2) shareholder distributions beyond Moody’s current expectations; or (3) liquidity constraints arising from a potential change of control.

Principal methodology

The principal methodology used in rating Bashneft was the Global Integrated Oil & Gas Industry published in April 2014.

Bashneft is an integrated oil company operating in Russia. Bashneft’s reserves are primarily concentrated in Bashkortostan, in close proximity to the company’s refining and petrochemical complex. The company also operates oil fields in the Tatarstan, Khanty-Mansi, Nenets and Orenburg regions and its total proved reserves amounted to 2.1 billion barrels of oil equivalent (boe) under the Petroleum Resources Management System (PRMS) classification as of January 2014. In the last 12 months ended 31 March 2014, Bashneft’s revenue amounted to $13.7 billion (net of export duties), and EBITDA to $3.4 billion.

Moody’s Interfax Rating Agency’s National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody’s global scale ratings in that they are not globally comparable with the full universe of Moody’s rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ».nn» country modifier signifying the relevant country, as in ».ru» for Russia. For further information on Moody’s approach to NSRs, please refer to Moody’s Rating Implementation Guidance published in August 2010 entitled «Mapping Moody’s National Scale Ratings to Global Scale Ratings».

About moody’s and moody’s interfax

Moody’s Interfax Rating Agency (MIRA) specialises in credit risk analysis in Russia. MIRA is a joint-venture between Moody’s Investors Service, a leading provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, and the Interfax Information Services Group. Moody’s Investors Service is a subsidiary of Moody’s Corporation (NYSE: MCO).