Russian state-run energy giants Rosneft and Gazprom are reportedly set to face significant debt refinancing challenges next year, with new sanctions making it even more difficult for them to tap Western financial markets, according to credit ratings agency Moody’s.
The pair are among Russian companies with debts totalling $112 billion due to mature over the next four years, with a peak maturity wall in 2015, Moody’s Investor Service stated in a report cited by Reuters.
It stated there was a very significant bank and bond debt maturity hurdle – in particular for Rosneft and Gazprom – to overcome next year.
Russian companies are facing tougher conditions to refinance international loans since the West imposed sanctions on some of them over Russia's involvement in Ukraine. On top of this, the country's economy has slowed and is expected to grow just 0.5% this year.
Washington imposed a new round of sanctions last week on Rosneft, gas producer Novatek and bank Gazprombank – companies run by allies of Russian President Vladimir Putin – that will bar them from financing debt of more than 90 days’ maturity with US sources.
"This year... refinancing for Russian issuers may present more challenges than before," Moody's analysts wrote in the report on investment-grade non-financial companies.
"The peak annual bank debt refinancing requirements of IG [investment grade] issuers in Russia is in 2015.”
Analysts have been concerned about Rosneft's ability to attract funds as costs of borrowing have risen for Russian companies after Moscow annexed the Crimean peninsula from Ukraine in March.
The state-owned oil company will need to repay $26.2 billion between July 2014 and December 2015, with peak repayments of $9.4 billion and $11.8 billion in the fourth quarter of 2014 and first quarter of 2015, respectively, according to another recent report by Moody's.
The agency said it estimated that approximately $5 billion to $6 billion of this will have to be refinanced.
Moody's said though that Rosneft has taken steps to mitigate refinancing risks by signing an oil suuply contract with China National Petroleum Corporation (CNPC).
Rosneft and CNPC last year agreed to double oil flows to China to 600,000 barrels per day in a $270 billion deal between 2018 and 2037 with partial prepayments.
The report said that Russian maturities were significantly concentrated in the energy sector, which accounts for 72% of total Russian debt maturing in the next four years, with the remaining 28% shared among the utilities, metals and mining, transportation services, telecoms and chemicals industries.
It stated that bank and bond debt held by Russian investment grade companies accounts for about 10% of the total $1.17 trillion refinancing requirements due between 2015 and 2018 in Europe, the Middle East and Africa, up from 8% a year ago.
Germany, France and the UK have larger refinancing needs, holding 15% each.