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S&P upgrades MOL credit rating to BB+

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Ratings agency Standard & Poor’s on Tuesday raised its long-term corporate credit rating for Hungarian oil and gas company MOL from BB to BB+, Hungarian news agency MTI reported today. The outlook for the rating is stable.

“The upgrade primarily reflects our expectations that MOL’s credit metrics will be stronger than we anticipated due to the downstream division’s better performance,” S&P said. S&P sees MOL’s funds from operations (FFO) to debt exceeding 45% on average, and expects the refining business will “generate resilient cash flows,” even assuming a 30% industry-wide decline in refining margins in 2016. 

S&P said MOL is “progressing well” with an efficiency improvement program, and sees growth projects in its petrochemicals business and investments in retail bringing in about $150 million of EBITDA per year. However, S&P added that it could lower MOL’s rating “if its performance weakened markedly owing to an even sharper decline in downstream margins, or if the company’s debt increases substantially from the current level due to acquisitions or financial policy decisions.”

A further upgrade could come on the back of “a pronounced improvement in MOL’s business, particularly on the upstream side,” S&P said, noting that a resolution to the conflict with the Croatian authorities over oil concern INA, as well as an increase in the scale of MOL’s upstream business, could result in such an improvement.

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