Fitch affirms MOL's ratings but sees no acquisition headroom

28 November 2011 16:10  [Source: ICIS news]

LONDON (ICIS)--Fitch Ratings has affirmed MOL's ratings but has warned that the Hungarian oil, gas and petrochemical group has no rating leeway for major debt-funded acquisitions, the ratings agency said on Monday.

MOL's long-term foreign and local currency Issuer Default Ratings (IDR) were affirmed at BBB- with Stable Outlooks, said Fitch.

“The rating affirmation reflects MOL's improved credit metrics in 2010–2011 in line with the agency's expectations,” it added.

“Following the acquisition of [a major stake in] Croatia's INA in 2008, the company has focused on organic growth, cost reduction and efficiency improvements across the MOL group, in particular at INA,” said Fitch.

However, Fitch cautioned that it felt “MOL has no rating headroom for large debt-funded acquisitions due to a number of negative developments in the external environment”.

These included the weak economy and increased tax burden in Hungary, difficult conditions in European refining and the increased business risk in Syria, which accounts for about 13% of MOL's planned oil and gas production in 2011, it said.

In addition, MOL faced several challenges in Croatia regarding INA, which provided 43% of MOL's earnings before interest, tax, depreciation and amortisation (EBITDA) in the first nine months of 2011, said Fitch.

Earlier on Monday, Croatia's new government said it would be seeking a much greater say in the management of INA. MOL owns 47.46% of the company but exercises management control over it under an agreement with a previous government.

Fitch added that it continued to regard MOL as a private company because its largest shareholder, the Hungarian state, does not control MOL given the 10% voting cap for all shareholders.

By: Will Conroy
+44 20 8652 3214

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