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The Standard & Poor's (S&P) international rating agency has decided to leave Yukos on its Creditwatch list at the CC level
The Standard & Poor's (S&P) international rating agency has decided to leave Yukos on its Creditwatch list at the CC level, after the company received a default notification on its financial obligations. According to the agency's report forwarded to RIA Novosti on Thursday, the rating will remain on the Creditwatch list with a negative outlook. Yukos was placed on the list on April 27, 2004 after reports about a possible default on the syndicated loan of $1 billion. On August 11, 2004, Yukos announced about receiving a notification on the $1.6 billion loan provided by the company's main shareholder, the Menatep group. In July, a similar notification was received about a syndicated bank loan of $1 billion. "Default notifications allow creditors to use export profits in gradual reimbursement of the debts," said Yelena Anankina, credit analyst with S&P. "Our definition of a default implies a failed payment, which has not been the case with Yukos yet." Nonetheless, the CC rating points to the high risk of the company's default in the near future. S&P is concerned over a potential liquidity crisis resulting from the company's frozen accounts in Russia, growing tax claims, legally limited opportunities to sell assets to attract funds and the risk of creditors demanding early settlement of the entire debt. The agency finds it difficult to make forecasts about the prospects of the company's $2.6 billion debt settlement after a possible default. S&P will closely follow further developments around the company: "whether the state power bodies and the company itself will decide to launch bankruptcy procedures; whether the state bodies' policy will force the company to declare bankruptcy or sell key assets generating financial flows; whether a compromise agreement will be found; and whether the company will be allowed to sells assets to pay back taxes and settle its other debts," added Ms. Anankina. "We will also see whether creditors will announce a formal default and whether the company will be able to continue legally servicing its debt and honoring its liabilities on export contracts used as a guarantee."
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