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Fitch affirms MOL ratings after announcement of purchase offer

Fitch Ratings said it affirmed Hungarian oil and gas company MOL's Long-term foreign and local currency Issuer Default Ratings (IDR) at 'BBB-' with Stable Outlooks and Short-term foreign and local currency IDRs at 'F3'.

Fitch also affirmed the 'BBB-' foreign and local currency ratings of MOL's senior unsecured debt, including its €750 million 2015 bond and €750 million 2017 bond.

The rating action followed MOL's announcement late Thursday that it would make a purchase offer to minority shareholders in its Croatian unit INA. MOL holds a 47.2% stake in INA and the Croatian state owns 44.8%.

Buying the entire 8% stake would cost MOL about HUF 84 billion (€300 million), Fitch calculated. Fitch estimated the acquisition would worsen MOL's leverage ratio defined as Fitch-adjusted net debt (including hybrid debt) to last 12 months (LTM) EBITDA by up to 0.2x from 2x at end-September 2010.

“In Fitch's view, MOL has limited rating headroom as a result of this upcoming transaction and various recent decisions of the Hungarian government, mainly with regards to additional taxes imposed on energy companies, including MOL. Consequently, any additional acquisitions pursued by the company or any additional decisions of the Hungarian government that substantially reduce MOL's cash flows are likely to put negative pressure on the rating,” Fitch said.

Fitch said it believes the macroeconomic situation in Hungary ('BBB'/Negative) creates downside risks for MOL, but this is partly offset by improved conditions for the oil and gas upstream business due to stronger oil prices and to a lesser extent, moderate improvement in refining margins in 2010.

The Stable Outlook incorporates Fitch's assumption that MOL's management will continue its prudent financial risk policy and will reduce the capital expenditure plan in case of weaker-than-projected post-tax cash flow, Fitch said. (MTI – Econews)