Fitch: Gaz Capital notes BBB

Fitch Ratings said it assigned a final senior unsecured rating of BBB to Gaz Capital SA's loan participation notes.

The €1 billion 3.389% notes due 2020 are the 30th series and the €500 million 4.364% notes due 2025 are the 31st series issued under Gaz Capital's $40 billion debt issuance program, which has a BBB rating.

The notes are issued on a limited recourse basis for the sole purpose of funding a loan by Gaz Capital to OAO Gazprom.

The proceeds will be used by Gazprom for general corporate purposes.

The noteholders will rely solely on Gazprom's credit and financial standing for the payment of obligations under the notes.

Gaz Capital is a special purpose financing vehicle of Gazprom, but is not directly or indirectly a subsidiary.

The ratings reflect the company's strong operating profile, Fitch said. It benefits from low uplift costs and a high reserve life and reserve replacement rate, the agency said.

In the short term, Fitch said it expects that at least in the medium term, Gazprom will continue to benefit from European gas sales under long-term contracts with prices largely linked to oil products prices.

While the agency said it anticipates continued pressure from off-takers on pricing terms under Gazprom's long-term European contracts due to the challenging economic environment, Gazprom has sufficient flexibility to accommodate some potential concessions without jeopardizing its credit metrics.

Gazprom continues to face soft demand for gas in Western Europe, its principal market, Fitch added.

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