Standard and Poor's Ratings Services said that it had lowered its long term issuer credit rating on Hungarian oil and gas company MOL to 'BB+' from 'BBB-'. The outlook is stable.
Standard and Poor's also lowered the long-term issuer credit ratings on special purpose vehicle Magnolia Finance to 'BB+' from 'BBB-'. The outlook is also stable. The following is the text of the credit rating agency's press release:
“The rating action reflects the debt financed acquisition of a 22.155% stake in Croatia-based oil company INA and our expectation that industry conditions will deteriorate, causing the group's financial credit measures to weaken further in 2009,” said Standard and Poor's credit analyst Per Karlsson.
In line with our general criteria, we have widened the notching applied to a hybrid bond issued by Magnolia Finance Ltd. to three from two to include two notches for subordination for high-yield issuers against one for investment-grade issuers. Accordingly, the rating on the hybrid has been lowered to 'B+' from 'BB'.
All ratings have been removed from CreditWatch, where they were placed with negative implications on July 17, 2008.
Following the acquisition on INA on October 16, 2008, MOL's adjusted debt increased to HUF 1.13 trillion. As a result, the group's full year 2008 credit ratios are expected to weaken below the level required for the previous 'BBB-' rating. Furthermore, MOL's higher debt coincides with a severe weakening of the macroeconomic outlook; the Hungarian economy is forecast to contract in 2009 as the global economy softens. We expect refining margins in 2009 to be notably lower than the 2005-2007 average, with a direct negative effect on MOL's cash flow.
The stable outlook reflects our expectations that the group's financial profile will weaken further in 2009 due to less favorable refining margins, higher debt, and weaker cash flow.” (MTI – Econews)