S&P ups Gazprom view to positive, rates notes BB-

Standard & Poor's said it revised its outlook on OAO Gazprom to positive from stable.

The outlook revision largely reflects the potential benefits of the Russian government's achievement of direct majority control over the group, S&P said.

At the same time, the agency said it affirmed its BB- long-term corporate credit rating on the company and rated Gazstream SA's proposed senior unsecured $646 million loan participation notes to be guaranteed by Gazprom at BB-.

In addition to the increased support that might result from the government's purchase of the 10.7% treasury stock that will give it direct majority control over the company, favorable international gas prices for 2005 and beyond, and gradually increasing domestic gas prices are also positive rating developments, the agency said.

Furthermore, the group's strong negotiating position for gaining access to gas projects undertaken by international and Russian oil companies should have a favorable financial impact as risks and funding requirements are shared or reduced, S&P added.

The ratings on Gazprom 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, the company's significant leverage and high capital expenditure needs, S&P noted.

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