S&P: IBA's restructurization of debt has no effect on SOCAR ratings
By Kamila Aliyeva
S&P Global Ratings reported that its corporate credit rating, outlook, and issue ratings on the State Oil Company of Azerbaijan Republic (SOCAR; BB/Negative) are unchanged following the announcement that one of Azerbaijan's largest banks, International Bank of Azerbaijan (IBA), will restructure its debt.
“Our rating on SOCAR remains underpinned by our assessment of an extremely high likelihood of extraordinary support from the government of Azerbaijan. We base our assessment on SOCAR's critical importance to the hydrocarbon-focused country--particularly with the large Shah Deniz-2 project, where SOCAR plays a central role, coming on stream next year,” the P Global Ratings reported that its corporate credit rating, outlook, and issue ratings on the State reported on May 19.
The government is heavily involved in SOCAR's strategy and monitors its debt, according to S&P Global Ratings, however, it is suggested that the company manages its day-to-day operations autonomously, and there are no state guarantees on the company's debt.
Therefore, the sovereign credit quality remains the key rating driver for SOCAR. “A negative rating action on SOCAR would arise if our assessment of SOCAR's stand-alone credit profile (SACP) weakened to our 'ccc' category from 'b+' currently, and at this stage, this is unlikely to happen,” the report said.
Nevertheless, S&P Global Ratings will continue to monitor the impact of IBA's current situation on SOCAR's SACP, including leverage, liquidity, any losses of cash kept with the bank, and access to international capital markets, among other rating factors.
“We understand that SOCAR has some, but not all, of its cash reserves with IBA, and meaningful outstanding debt to IBA. We will also continue to assess any changes in the central government's policy regarding extraordinary support for its government-related entities, SOCAR in particular,” the report said.
SOCAR is 100 percent owned by the government of Azerbaijan. SOCAR participates in joint ventures (including ventures in Georgia and Turkey), consortia, and operating companies established with SOCAR’s participation. The company has represantatives in Iran, Romania, Ukraine and Germany.
The company, which is keen on expanding operations in the retail oil products market abroad, is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in the domestic and international markets, and supplying natural gas to industry and the public in Azerbaijan.
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Kamila Aliyeva is AzerNews’ staff journalist, follow her on Twitter: @Kami_Aliyeva
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