S&P puts Kyivstar on positive watch

Standard & Poor's said it placed Ukraine-based CJSC Kyivstar GSM's BB- long-term corporate credit rating on CreditWatch with positive implications following the announcement of a bid for the company by Russian mobile telecommunications operator Vimpel-Communications JSC (BB/positive) for $5 billion in common registered shares plus assumed debt.

At the same time, the BB- long-term senior unsecured debt rating on the company's loan-participation notes issued by Dresdner Bank AG (A/stable/A-1) was also placed on CreditWatch with positive implications.

The CreditWatch placement reflects the potential for the ratings on Kyivstar to be raised by one notch if VimpelCom successfully completes the proposed all-share purchase of 100% of Kyivstar, S&P said. The transaction could remove a rating constraint constituted by the potential knock-on effects related to a dispute between Kyivstar's direct shareholders, Telenor ASA (A-/negative/A-2) and Storm, controlled by an affiliate of Russia-based Alfa Group.

Furthermore, the agency said the potential transaction would lead to consolidation in the Ukrainian market, enabling Kyivstar (under VimpelCom ownership) to pursue an unfettered strategy in Ukraine. A successful transaction could also result in a number of operating and financial synergies, leading to a strengthening of Kyivstar's business profile.

Lease-adjusted annualized total debt to EBITDA for the first nine months of 2005 was 1.1x.

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