MOL’s Fitch ratings unaffected by Hungary downgrade

Ratings

Fitch Ratings on Tuesday said Hungarian oil and gas company MOL’s ratings were unaffected by a downgrade of Hungary’s sovereign ratings on Friday.

MOL’s ratings are currently capped by Hungary’s Country Ceiling of ‘BBB’ rather than the sovereign rating, Fitch said. Hungary’s Country Ceiling was downgraded to ‘BBB’ from ‘A-’, along with the country’s foreign currency Issuer Default Rating (IDR) which was downgraded to ‘BB+’, from ‘BBB-’, with a Negative Outlook on January 6, it added.

MOL has Long-term foreign and local currency IDRs of ‘BBB-’ with Stable Outlooks, Short-term foreign and local currency IDRs of ‘F3’ and foreign and local currency ratings of its senior unsecured debt of ‘BBB-’.

"While rated above the sovereign government’s obligations, MOL’s profile does not possess the characteristics that exceptionally can support a rating above the Country Ceiling, and a downgrade of MOL would be automatically triggered if Hungary’s Country Ceiling is downgraded below ‘BBB-’," Fitch said.

"The ratings reflect MOL’s improved credit metrics in 2010-2011 and the company’s plan to fully finance capex from operating cash flow in 2012-2013. Fitch assumes that MOL’s management will continue its prudent financial risk policy and would reduce capex in the event of weaker-than-projected cash flow," the ratings agency said.

Fitch said MOL’s rating headroom was "limited". "Most likely triggers for a near-term revision to the ratings would arise from a "further deterioration of the economic situation in Hungary", "more difficult and costly access to debt markets and bank funding", "increased financial leverage" or a "material and prolonged deterioration of cash flow from Syria if it were to lead to a weakening of MOL’s financial profile".

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