UPDATE 1-LUKOIL borrows $1.5 bln to buy back shares

* LUKOIL gets $1.5 bln loan for share repurchase from Conoco

* LUKOIL buying back 8.4 pct of its shares for $3.44 bln

* Has option to buy back another 11.6 pct for $5 bln

* Another repurchase means more leverage, lower rating – S&P

(Adds details)

MOSCOW, Aug 13 (BestGrowthStock) – LUKOIL (LKOH.MM: ), Russia’s No. 2
oil producer, has raised $1.5 billion in an unsecured loan to
finance part of the buyback of its shares from ConocoPhillips
(COP.N: ), the company said on Friday.

U.S. oil major Conoco said last month that it would sell its
entire 20 percent stake in LUKOIL, which will buy back 40
percent of it for $3.44 billion using the $1.5 billion club loan
from six banks and its own funds. [ID:nWLA0793]

LUKOIL has a 60-day option that expires on Sept. 26 to buy
back the remaining 11.61 percent of Conoco’s stake, worth an
estimated $5 billion.

On Thursday ratings agency Standard and Poor’s put the
non-state owned oil giant on a negative credit watch and expects
to downgrade the Rusian group if it exercises the remaining
buyback option.

“We are placing LUKOIL on CreditWatch with negative
implications because a decision to exercise the option would
materially increase leverage,” the agency said in a statement.

Meanwhile Fitch kept LUKOIL’s long-term credit rating at
BBB-.

LUKOIL Vice President Leonid Fedun told Reuters last month
that if it decides to buy back the remaining shares from Conoco
it will let the shares grow in value and then either cancel them
or use them for M&A activity. [ID:nLDE66T1NJ]

Yields on LUKOIL’s $500 million of eurobonds expiring in
2022 (549876AA8=: ) are now trading 40 basis points above
Gazprom’s (GAZP.MM: ) notes for the same year.
(Reporting by Jessica Bachman; Editing by Michael Shields)

UPDATE 1-LUKOIL borrows $1.5 bln to buy back shares