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Concorde Capital Research: Fitch assigns B-(EXP) rating for proposed Naftogaz Eurobond

November 06, 2018 | Cbonds

Fitch Ratings has assigned a B-(EXP) rating for the Eurobond that is going to be placed by Ukraine’s state-controlled natural gas company Naftogaz (NAFTO), the agency reported on Nov. 2. The bond's rating is the same as for Naftogaz itself, and the same as Ukraine’s sovereign rating. Fitch analysts applied conservative assumptions for Naftogaz fundamentals, assuming no compensation for the company for PSO regime and future unbundling of gas transit and storage assets (expected in 2020), average annual increase of internal gas prices by 9% yoy in 2019-2020, no cash payment from Gazprom related to a USD 2.6 bln arbitration award, and the company’s annual dividends payable to the state of UAH 25 bln annually.

Alexander Paraschiy: Even after applying its conservative assumptions, Fitch analysts concluded that the company will have a sustainable balance sheet allowing it to be rated on a sovereign level. We see little potential for a Naftogaz rating increase above the sovereign level, even in case the reality will be better than Fitch assumes. This is because in recent years, the company has become a significant contributor to the state budget (in terms of taxes and dividends). Meanwhile, we expect Naftogaz will successfully place a five-year Eurobond in the coming six days at around a 9.8% rate.

Company: Naftogaz

Full company namePJSC "Naftogaz of Ukraine"
Country of riskUkraine
Country of registrationUkraine
IndustryOil and gas


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