Moody’s Investors Service has downgraded the ratings of eleven Russian regions, four cities, and three state-owned companies, the ratings agency said on Wednesday.
Moody’s rating agency earlier downgraded seven Russian financial institutions – Sberbank, Bank VTB, Gazprombank, Russian Agricultural Bank, Agency for Housing Mortgage Lending, Vnesheconombank and Alfa-Bank, Tass quoted it as saying.
The rating actions “follow the weakening of Russia’s credit profile, as reflected by Moody’s downgrade of Russia’s government debt rating to Ba1 from Baa3 on February 20, 2015,” the report said.
Moody’s downgraded Russia’s sovereign debt rating to speculative grade of Ba1 from Baa3 with a negative outlook, in the night of February 21. The ongoing crisis in Ukraine and the drop in oil prices were cited as the main reasons for the downgrade.
Bonds Slide
Russian borrowing costs surged the most in more than a month and the ruble weakened on concern the nation’s second junk rating this year will force some investors to sell sovereign bonds, Bloomberg reported.
The yield on local-currency government bonds jumped the most since Jan. 13 in the first trading day for domestic securities since Moody’s Investors Service cut Russia to Ba1 on Friday.
The downgrade by Moody’s, which cited the conflict over Ukraine and an oil-price slump in its decision, followed a similar cut by Standard & Poor’s last month. The junk ratings risk triggering as much as $4.5 billion of outflows from Russian foreign-currency debt by bond funds that track Barclays Plc indexes, Barclays analysts said in an e-mailed note on Tuesday.
“The most negative effect of the Moody’s downgrade is that it’ll make refinancing for Russian companies more expensive and will hurt lenders as companies turn to them for loans,” Sabina Mukhamedzhanova, a money manager at Promsvyaz Asset Management in Moscow, said by phone. “The Russian market has had a significant rally and investors are taking profits.”
Massive Earnings Rise
Russia’s United Company Rusal Plc reported a more than six-fold rise in fourth-quarter earnings due to a slump in the ruble against the dollar and stronger aluminum prices, and forecast a deficit in aluminum supply in 2015 outside China.
The world’s biggest aluminum producer warned, however, that aluminum premiums in Asia may come under pressure from rising exports of semi-manufactured products from China, the world’s largest aluminum producer and consumer. “Looking at the industry as a whole, we believe that global aluminum demand will grow by 6.5% in 2015 to 59 million tons, while production growth outside of China will continue to be limited, with 1.1 million tons remaining in supply deficit,” Chief Executive Vladislav Soloviev said in a statement.
