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Moody’s, Fitch May Cut Rosneft on $45 Billion Cost of TNK-BP

Moody’s Investors Service and Fitch Ratings may reduce the debt ratings of OAO Rosneft as Russia’s largest oil producer needs to raise $45 billion to acquire TNK-BP from BP Plc and its billionaire partners in the venture.

Rosneft’s Baa1 and TNK-BP’s Baa2 ratings are under review for possible downgrade on a lack of information on the structure of $28 billion of the funding for the deal, Julia Pribytkova, a Russia oil and gas analyst at Moody’s, said today by phone. The size of the deal also makes Rosneft more reliant on oil prices.

“The company could come under pressure when or if oil prices weaken,” Pribytkova said. Rosneft would be “fine” at $95 a barrel, Moody’s estimate for next year, she said, while a $60 a barrel rate may affect its immediate access to funds.

Fitch also placed the state-owned company on a negative rating watch after the TNK-BP deal, it said in a statement.

Rosneft on Oct. 22 agreed to buy BP’s 50 percent stake in TNK-BP for $17.1 billion in cash and a 12.84 percent holding in the Russian oil producer. It also announced a deal to purchase the other half of the venture from the billionaires.

The company will be able to use cash currently on TNK-BP’s balance sheet to pay its borrowings, Rosneft’s Chief Executive Officer Igor Sechin said yesterday. TNK-BP didn’t pay dividends this year after a dispute between BP and its venture partners.

Cutting Interest

Rosneft was able to reduce the interest it’s offering to pay on about $15 billion of loans to buy BP’s half of TNK-BP after banks oversubscribed to the deal, two people with knowledge of the terms said this month.

The company’s 2011 sales would have been $152.2 billion if it held TNK-BP and earnings before interest, taxes, depreciation and amortization would have been $36.6 billion, the Moscow-based oil producer said in a presentation posted on its website today.

Rosneft debt would rise to about 2 times Ebitda after the deal, compared with 1 times at OAO Gazprom, Pribytkova said.

“If the transaction closes Fitch would expect no more than a one-notch downgrade, leaving Rosneft’s ratings as investment grade,” the ratings company said today in its statement. Fitch now rates Rosneft BBB, its second-lowest investment grade.

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