OREANDA-NEWS. On May 20, 2009 The international rating agency Standard & Poor’s placed its BB long-term corporate credit rating and senior unsecured debt rating of TNK-BP International Ltd. (TNK-BP) on CreditWatch with positive implications, reported the press-centre of TNK-BP.

A press release of the rating agency says that the B short-term corporate credit rating of the company was affirmed. “The CreditWatch placement reflects our view that TNK-BP has improved its corporate governance and stabilized its management and shareholder structure,” said Standard & Poor’s credit analyst Karl Nietvelt.

“We expect to resolve the CreditWatch in the coming weeks, with the possibility of a one-notch upgrade,” said Mr. Nietvelt.

“In addition to the perceived improvements in governance, we will further analyze TNK-BP’s resilience to the current downturn, which we expect to remain satisfactory thanks to its better-than-peer free cash flow generation and adequate liquidity,” informs the press release.

In August 2008, S&P lowered TNK-BP’s ratings because of the conflict between its shareholders. The rating agency pointed out the main positive changes in corporate governance of the company in the last nine months:

a new agreement was signed by the shareholders in the end of 2008, which implies, in particular, holding an initial public offering (IPO) in future. We think that this eased the tension in relations between the shareholders;

a new Board of Directors was formed in the first months of 2009 with four representatives of the Alpha/Access/Renova (AAP) consortium, four representatives of BP Pls, and three independent directors;

new key managers were appointed last month, including a new Chief Financial Director and a new Downstream Executive Director;

we perceived from conversations with the management that the company approved a more stringent and conservative policy, which implies maintenance of the company debt (more exactly, the ratio between the net debt and the sum of net debt and own capital) at a level of no more than 25–35%.

“Appointment of the Chief Executive Officer is not made yet and will probably require more time, but we appreciate the fact that both shareholders support the current Chief Operating Officer acting as a temporary head of the company and take into account the current operating and financial indicators of TNK-BP, which remain high despite the difficult operating conditions in Russia and dropping oil prices,” notes the press release of the rating agency.

The rating of TNK-BP, owned by BP and AAP on parity basis, reflects its position as the third largest vertically oriented oil company in Russia. The company owns large export-oriented producing assets as well as refining and sales enterprises. TNK-BP exceeds other oil companies of the same level with its ability of generating a positive free cash flow and better use of borrowed funds.

“Apart from these positive aspects, however, we are considering the remaining risks of doing business in Russia, in particular, the considerable weakening of the corporate sector and financial market of the country, drawbacks of the institutional system, and risks related to the oil industry (such as resource nationalism, arbitrary withdrawal of licenses, and imposition of environmental sanctions). The situation with corporate governance has improved tangibly these days but it still limits the ratings,” says the press release of S&P.