Russia Funding Shows Rosneft Losing Credit Quality, Kudrin Says

By turning to Russia’s wealth funds for loans, OAO Rosneft, the world’s biggest publicly traded oil producer by volume, shows it’s losing status as a borrower, says former Finance Minister Alexei Kudrin.

Rosneft is eligible for financing from the National Wellbeing Fund after the government approved its investment program, Interfax reported today, citing Deputy Prime Minister Arkady Dvorkovich. Borrowing from the state indicates Rosneft can’t independently refinance its debt, Kudrin said in Moscow.

“It’s a decrease in Rosneft’s quality, status as a borrower,” Kudrin said about the company getting loans from or selling bonds to the government. “It will significantly affect its capitalization, its prospects.”

Capital markets are closing to Russia as the U.S. and European Union restrict borrowing by companies including Rosneft and impose rolling sanctions, saying President Vladimir Putin is backing an insurgency in eastern Ukraine. The state-controlled company has almost $40 billion of net debt after buying Russia’s third-largest oil producer from BP Plc and a group of billionaires in 2013.

While Rosneft may need some aid while under sanctions, the government should weigh what form that takes and whether some projects could be financed by other companies or countries, Kudrin told reporters after a conference organized by the American Chamber of Commerce in Moscow.

The U.S. barred Rosneft, among other companies, from accessing its markets to sell debt with maturities longer than 90 days, while the EU has narrowed the limit to 30 days. Bans imposed by the U.S. and the EU on exports of oil and gas technology to Russia, the world’s biggest energy exporter, are also poised to disrupt billions of dollars in exploration.

OAO Novatek, Russia’s second-biggest natural gas producer and also on the U.S. blacklist, may also tap the National Wellbeing Fund, Interfax reported Sept. 13, citing Finance Minister Anton Siluanov. The fund, which holds about $85.3 billion, can allocate a maximum 60 percent of its assets to infrastructure projects.

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