Moody's places ratings of 51 Russian companies on review for downgrade as war escalates

Rating action reflects the negative implications for Russia's credit profile as sanctions are imposed, rating agency says

A board showing the rouble's exchange rate against the US dollar. The Russian currency has tanked under a wave of US and EU economic sanctions. Reuters

Moody's Investors Service placed the ratings of 51 Russian non-financial corporates on review for downgrade as the country's economy reels under sanctions amid Moscow's intensifying military offensive in Ukraine.

The baseline credit assessments of government-related issuers are also under review for downgrades, Moody’s said in a statement on Wednesday. The rating agency warned last month that a Russian military incursion into Ukraine would probably result in sovereign ratings of both nations being placed on a review for a downgrade.

“The placement of Russia's sovereign ratings on review for downgrade was triggered by Russia's further military operation in Ukraine,” Moody’s said.

The move “reflects the negative credit implications for Russia's credit profile from the additional and more severe sanctions being imposed”, the ratings agency said.

Russia’s economy has taken a hit after the US and its allies took punitive actions against Moscow following its decision to undertake a military operation in Ukraine. Russian companies and oligarchs in President Vladimir Putin's inner circle face having their assets frozen, while European countries also close their airspace to Russian private and commercial aircraft.

Some Russian banks have also been barred from the Swift global financial network, while the US Treasury prohibited Americans from engaging in transactions with the Bank of Russia, the Russian Direct Investment Fund and the country's Ministry of Finance.

On Wednesday, Russian lender Sberbank said it is exiting European markets as a result of big cash outflows and threats to its staff and property.

"In the current environment, Sberbank has decided to withdraw from the European market. Subsidiary banks of the group are faced with an abnormal outflow of funds and a threat to the safety of employees and branches," the bank said.

The Russian rouble tanked as much as 28 per cent, falling to a record low of 118 against the US dollar at the start of trading on Monday, well above its 75 mark. The currency's freefall appeared to come to a halt on Tuesday but it fell again on Wednesday and was trading at 107.50 against the greenback at 3.31pm UAE time.

Russia’s central bank imposed capital controls on Monday and more than doubled interest rates to 20 per cent, their highest in nearly two decades, to support the currency. The Bank of Russia also restricted the transfer of coupon payments to foreign holders of rouble bonds and kept the Moscow stock exchange closed for a third day.

The list of major western companies turning their backs on Russia is also growing in the fall-out over the country's military offensive in Ukraine. Companies such as Apple and Google; energy majors Shell, ExxonMobil and BP; and car makers GM, Volvo and Volkswagen, as well as shipping giant Maersk, have already stopped business in Russia, which piles more pressure on its economy.

Moody’s latest ratings move follows the sovereign rating action on Russia on February 25, when it placed the government’s Baa3 long-term issuer and senior unsecured rating on review for downgrade.

The rating agency said its actions on the affected corporates are a “direct consequence of the sovereign rating action”.

It reflects Moody's view that a potential downgrade of Russia's sovereign ratings and lowering of its country ceilings could lead to downgrades of the affected corporates' ratings, “because of their strong interlinkages with the sovereign rating”.

__________________________

From Apple to BP: major western companies exit Russia amid Ukraine crisis

Updated: March 02, 2022, 3:38 PM
EDITOR'S PICKS