Fitch changes TNK-BP
MOSCOW. Nov 23 (Interfax) - Fitch Ratings has revised TNK-BP International Ltd.'s (TNK-BP) Outlooks to Stable from Negative, the agency said in a press release.
The agency has also affirmed TNK-BP's Long-term foreign and local currency Issuer Default Ratings (IDRs) and foreign currency senior unsecured rating at 'BBB-', and its Short-term foreign currency IDR at 'F3'. As guarantor, TNK-BP's 'BBB-'senior unsecured rating is applied to issues under TNK-BP Finance's USD8bn guaranteed debt issuance programme.
The Outlook revisions reflect Fitch's opinion that the operating performance of TNK-BP has not been materially impacted by the shareholder dispute that played out in the second half of last year with the departure of several western managers, including the CEO, as well as BP plc ('AA+'/'F1+'/Stable) seconded specialists. Fitch has taken comfort from the company's demonstrated ability to implement key production projects in a timely manner and on budget in 2009.
Fitch has also taken comfort from TNK-BP's recent indication that the Yamal project, which has the potential to become a major new production centre for TNK-BP and Russia on the whole, is the company's primary strategic focus. This has assuaged Fitch's previous concern regarding the company's strategic direction, with the possibility the company will be seeking to increase its geographic footprint beyond Russia into potentially more volatile non-OECD areas, possibly changing the company's business risk profile.
In March 2009, the agency also expressed concern that the deteriorating economic environment in Russia could result in greater dividend payments to shareholders, resulting in the removal of cash from the business that could otherwise be invested in its future growth. TNK-BP has stated on 5 November 2009 that the company's dividend policy firstly ensures operating costs including taxes are met and that any debt due can be repaid. Thereafter, cash required for capital investment in the business will be assessed. Any residual cash may then be considered for distribution as dividends. As such, Fitch is less concerned that the company's dividend payment policy will negatively impact its future investment possibilities.
Additionally, Fitch had previously expressed concern that the company did not have a full time Chief Executive Officer. The company announced on 19 November 2009 the appointment of Maxim Barsky as the new permanent CEO. The position will be occupied by Mikhail Fridman on an interim basis until 01 January 2011.
Finally, the Outlook revision is further supported by Fitch's anticipation that TNK-BP will maintain key credit ratios, such as funds from operations (FFO) adjusted net leverage well below 1.5x and an FFO interest coverage ratio of well above 10x, in line with the current ratings.
TNK-BP International Ltd. is a BVI-registered parent of a number of exploration and production, refining and marketing companies with assets and operations primarily in Russia and Ukraine. The TNK-BP group is one of the largest vertically integrated companies in Russia and has the third-largest oil reserves and production volume in the country. Ownership and control is split between BP plc (50%) and Alfa Group (25%), Access Industries (12.5%) and Renova (12.5%), collectively referred to as AAR.