Fitch downgrades outlook of Gazprom, Russian Railways and RusHydro to Stable.

By bne IntelliNews January 18, 2012
Fitch Ratings downgraded the outlooks on the long-term IDRs (Issuer Default Ratings) of state-owned majors Gazprom, Russian Railways and RusHydro hydropower holding from Positive to Stable, following this week's downgrade of outlook on Russia's sovereign BBB rating from Positive to Stable. Gazprom's and Russian Railway's long-term IDRs were affirmed at BBB and national scale rating at AA(rus), while RusHydro's long-term IDR was affirmed at BB+ and national scale rating at AA(rus). Fitch noted that independent creditworthiness of Gazprom is valued with a Positive outlook, but the outlook is held back by the sovereign rating due to high concentration of company's assets in Russia and state majority ownership of the natural gas giant. Russian Railways continues to enjoy strong ties with the state, Fitch believes, although the agency recently stopped directly tying its ratings to the sovereign ones due to absence of direct state guarantees on railroad monopoly's debt. RusHydro's ratings, in turn, are tied to Russia's sovereign ratings (two notches down) due to state ownership, strategic importance for the state and state investment financing. RusHydro's own creditworthiness is valued by Fitch at BB. As reported this week, Fitch Ratings downgraded the outlook on the long-term BBB sovereign rating of Russia from Positive to Stable. The downgrade was attributed to higher political risks and worse economic conditions since the last rating approval in September 2011, with probability of rating upgrade diminishing fast. Fitch believes that PM Vladimir Putin is going to win the upcoming presidential elections in March, but it is unclear what will the reaction to recent political protests will be. Agency notes that political instability is causing the capital outflow and will pressure Fx/gold reserves of the central bank and RUB exchange rate, reminding that in 2011 capital outflow more than doubled to USD 84bn, Fx/gold reserves dropped from USD 545bn to USD 500bn from August 2011 and RUB weakened by about 11% in the last four months of last year.

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