S&P could lower Sistema

S&P said it placed the BB long-term corporate credit rating on Sistema PJSFC on CreditWatch with negative implications.

At the same time, the agency placed the BB issue rating on Sistema's $500 million senior unsecured notes on negative watch.

S&P said the CreditWatch placement reflects its view that Sistema's liquidity and leverage might weaken as a result of a RUB 170 billion (about $3 billion) claim from Rosneft related to Sistema's previous holding of a 79% stake in Bashneft (unrated). Bashneft, currently owned by Rosneft, is a Russian vertically integrated oil company that was Sistema's second-largest asset in 2010-2014, along with telecom operator Mobile TeleSystems (MTS).

Rosneft is claiming the recovery of damages – which it alleges were incurred as a result of reorganization of Bashneft – from Sistema and its subsidiary Sistema-Invest during Sistema's ownership. The claim amounts to RUB 170.6 billion (adjusted for ruble depreciation).

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