Moody's rates AK Transneft

Moody's Investors Service assigned a Baa3 senior implied rating to OAO AK Transneft and a Ba1 senior unsecured issuer rating, reflecting the high level of secured debt at Transneft, which weakens the position of senior unsecured creditors.

The outlook is stable.

Moody's said that Transneft's Baa3 senior implied rating reflects the company's importance to the Russian economy and strategic development, its state ownership and close control by the Russian government, the de facto monopoly nature of its business in a benign regulatory environment, the company's growing transmission volumes and relatively predictable revenue development, its strong margins and coverages and conservative financing policy.

At the same time, however, Moody's said Transneft's rating takes into account the considerable challenges that the company faces to maintain and modernize its vast crude oil transportation system and expand its export capacity which is being stretched under current market conditions, to link new oil fields to its network to support overall declining capacity utilization, to confront small but growing competition from other new pipelines and to operate under the direction of the Russian government.

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