Moody's downgrades Naftogaz

Moody's Investors Service said it downgraded NJSC Naftogaz of Ukraine's foreign-currency corporate family rating and probability-of-default and debt ratings to Caa1 from B2.

This concludes the review of Naftogaz's ratings begun on March 11, and the outlook is negative.

The rating action reflects Moody's reassessment of the company's fundamental credit quality and the government support factor that plays an important role in the overall rating of Naftogaz.

The agency said the company's standalone credit profile has worsened in view of its mandate to secure the purchase of over 19 billion cubic meters of gas during 2009 for gas storage as well as its debt service commitments. The lower ratings also reflect a strained liquidity profile of the group, insufficient cash reserves and increased uncertainty with regard to its ability to honor its debt obligations.

Moody's also reassessed and reduced - to medium from high - the government support assumption, reflecting the heightened political tensions and worsening economic conditions in Ukraine as well as slow progress in negotiations with Russia, Gazprom and potentially other third parties with respect to financing needed to fund purchases of gas for the country's strategic reserve.

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