S&P ups Gazprom to BB

Standard & Poor's said it raised its long-term corporate credit rating on Russian gas giant OAO Gazprom to BB from BB-. The outlook is positive.

The action reflects Gazprom's improving operating and financial performance in 2005 due to favorable gas prices, refinancing progress and a perceived improvement in the Russian government's support to the company, S&P said.

Gazprom's ratings are constrained by the risks of operating in the Russian Federation (foreign currency BBB-/stable/A-3; local currency BBB/stable/A-3), still-low domestic gas prices, significant and rising debt levels and high capital expenditure needs that constrain free operating cash flows, S&P said.

The positive outlook reflects that the rating could be raised to BB+ if and when Gazprom receives $7 billion cash from Rosneftegas for the 10.7% treasury stake, scheduled by year-end, which would help to refinance part of the $13 billion Sibneft acquisition, S&P said.

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