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MOL’s INA bid may affect ratings if heavily leveraged, City says

MOL’s bid to boost its share in Croatia’s INA oil company may affect its credit rating if the buy-out is highly leveraged, London-based analysts have said.

Standard & Poor’s oil analyst, Karl Nietvelt told Econews on Tuesday that it’s not surprising to see MOL’s interest in trying to acquire a majority stake in INA. “It’s pretty well known” that when MOL initially bought 25% it was with the aim to eventually get a majority stake in the Croatian company, Nietvelt said. He wouldn’t discuss any potential ratings implication for MOL, however. MOL’s corporate rating is currently BBB- with stable outlook.

Merrill Lynch said in a comment released in London that in the context of MOL’s current BBB-/stable rating at S&P, it sees “very low flexibility” for MOL’s leverage as a large debt component “would be likely to see MOL downgraded”. However, recent press reports and government comments have suggested that a share swap is the intended structure, and based on this “our base case would have to be that the company is able to execute this transaction with a neutral rating impact”.

In a separate comment, Citigroup said that at this point “we worry that MOL has the financial flexibility to make a $2 billion bid for control of INA, given moves on ‘treasury’ shares, and increased investment in the upstream”. Since taking a 25% stake in INA in 2003 for $505 million, MOL has worked hard on restructuring the company, particularly in the downstream, but has been unable to progress to a controlling stake, unlike OMV’s successful consolidation of Petrom in Romania, Citigroup added. (MTI-Econews)