Fitch degrades Russian companies

BET: Credit assessor Fitch on Saturday downgraded 28 Russian natural resource companies, including gas giant Gazprom, warning they were at risk of defaulting under sanctions imposed over Russia’s invasion of Ukraine.

Fitch Ratings said in a statement it had downgraded the ratings of the companies, which also include oil producer Lukoil and miner Rusal, from B to CC. This last note implies that some form of default was “likely”.

He cited a March 5 Russian decree that allowed Russian companies to settle the debts of certain blacklisted foreign companies in rubles rather than foreign currency.

The move, announced as the ruble plunged, was a response to international sanctions imposed on Russia over its Feb. 24 invasion.

The executive order, “in the context of an escalating sanctions regime, could impose insurmountable obstacles to the ability of many companies to make timely payments on foreign and local currency debt to certain international creditors,” said Fitch. Another major rating agency, Moodys, also downgraded Gazprom and Lukoil this week. Three major raters have rated Russia as at risk of defaulting on its long-term sovereign debt due to sanctions.

A lower credit rating makes it harder for a company or country to borrow money at manageable rates.

In an escalation of sanctions, the United States and Britain declared on March 8 that they were cutting imports of Russian oil. “The continued tightening of sanctions, including restrictions on energy trade and imports, increases the likelihood of a political response from Russia and further weakens its economy, eroding the operating environment for its businesses,” added Fitch.

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