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VimpelCom Shareholder Dispute Currently Does Not Affect The Ratings
Published on:
The ratings agency, Standard and Poor's has said that the ongoing shareholder dispute at Russia's VimpelCom does not affect its view of the company's debt ratings, but it could ultimately damage VimpelCom's liquidity management.
"Our rating on VimpelCom factors in a number of risks that we consider it faces related to its corporate governance, reflecting the long-lasting conflicts between the company's shareholders," said Standard & Poor's credit analyst Alexander Griaznov." Accordingly, the renewed litigation between key shareholders Altimo and Telenor regarding their ownership of VimpelCom did not dent our fundamental view of the company's corporate governance."
VimpelCom has a track record of withstanding shareholder disputes, but this has never affected its operations, the report says. Furthermore, Standard & Poor's also believes that the conflict itself, although currently limiting the ability of the Russian subsidiary Vimpel-Communications JSC to upstream cash, does not currently meaningfully damage the group's liquidity because debt at the parent company VimpelCom is not significant.
"Nevertheless, this assumes that the shareholders will resolve the deadlock in the next three to six months. A longer limitation on upstreaming cash could be negative for the company's liquidity management and could raise more fundamental governance questions," said Mr. Griaznov.
The report also addresses VimpelCom's current dispute with the Algerian government over VimpelCom's Algerian subsidiary, which is accused of tax infringements.
"Our base-case assessment assumes that the Algerian subsidiary will be sold at a price that we would consider fair, or that VimpelCom will settle the ongoing dispute with the government and retain the operations," said Mr. Griaznov. "An alternative scenario, such as an expropriation of the asset by the government, would likely negatively affect the VimpelCom ratings. However, we currently consider the probability of this as less than 30%, which is consistent with a stable, not a negative outlook," said Mr. Griaznov.
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