MOSCOW (MRC) -- On 8 February, it was announced that the government of the Republic of Tatarstan (Ba2 stable) had added a 22% stake, representing 25% of voting shares -- almost its entire stake - in Nizhnekamskneftekhim PJSC (NKNK, Ba3 stable) to its 2016 privatisation plan. NKNK is a major Russian petrochemical company majority owned by private, Tatarstan-focused TAIF Group (unrated; 50% of NKNK's capital, including 52.3% of voting shares), said Moody's.
The privatization of NKNK, if it materializes, would be credit negative for the company because it would reduce the government's involvement and the likelihood of government support -- factors that currently enhance NKNK's credit quality. However, the actual impact on NKNK's credit quality would depend on the terms and conditions, as well as the execution of the privatization, all of which remain highly uncertain. Moreover, NKNK's strong financial profile mitigates some of the rating pressure from the possible privatization. As such, there is no immediate rating impact from the inclusion of the government's 22% stake in NKNK in the 2016 privatization plan.
In addition to its stake in NKNK, the Tatarstan government added a 4.31% stake in Tatneft PJSC (Ba1 under review for downgrade), a Russian major oil company, and a 9% stake in Taneco JSC (unrated), an oil processing complex, to the 2016 privatization plan. According to the announcement, the stakes may be disposed or used as equity contributions to support the economy and key businesses of the Republic of Tatarstan. For this purpose, the stakes were transferred from government-owned holding company Svyazinvestneftekhim OAO (SINEK, Ba2 negative) to the Ministry of Land and Property. No further details on possible privatization transactions have been disclosed or commented on by the government.
NKNK, Tatneft and Taneco are all part of the oil and petrochemicals sector of the Republic of Tatarstan, and as such will likely maintain their importance to the government. However, in contrast to the other two companies (where under the above scenario the government would still control directly or indirectly approximately 30%), the government is disposing of almost its entire stake in NKNK under the 2016 privatization plan. As such, the transaction would distance NKNK from the government and remove the credit enhancement from implied government support, which could reduce its credit quality to the standalone one.
At the same time, depending on the post-privatization ownership structure, business and financial strategy, transparency and quality of corporate governance, this pressure on NKNK's credit quality could be mitigated by its low leverage, strong financial performance and reasonably invested asset base. For the 12 months to June 2015, NKNK's debt/EBITDA was around 0.2x and its EBITDA margins strong at 20.1%. These ratios provide the company with a cushion within its Ba3 rating, even in the current challenging domestic and global market environment.
As MRC informed earlier, Nizhnekamskneftekhim Group announced that it has started up new units for production of halobutyl rubber and production of feedstock for isoprene rubber.
PJSC Nizhnekamskneftekhim – one of the largest petrochemical companies in Europe, the leader in the production of synthetic rubbers and plastics in the Russian Federation. The Company is part of TAIF Group. The main production facilities are located in the city of Nizhnekamsk, Republic of Tatarstan. The Company was founded in 1967. The range of products output comprises more than one hundred items, includinggeneral purpose and specialty synthetic rubber; plastics: polystyrene, polypropylene and polyethylene; monomers being a feedstock to produce rubbers and plastics; other petrochemical produce (ethylene oxide, propylene oxide, alpha-olefins, surfactants, etc).
MRC