SOFIA (Bulgaria), July 29 (SeeNews) - International credit agency Fitch said it placed Bulgarian fuel retailer Petrol's Long-term Issuer Default rating of 'CC' on rating Watch Negative.
Fitch also placed Petrol's senior unsecured rating of 'CC' for its 100 million euro ($129.9 million) notes, due in October 2011, on rating Watch Negative. Petrol's recovery rating is 'RR4'.
Following is Fitch's statement issued on Wednesday:
"Fitch Ratings has today placed Bulgaria-based fuel distributor Petrol AD's Long-term Issuer Default rating (IDR) of 'CC' on rating Watch Negative (RWN). Fitch has also placed Petrol AD's senior unsecured rating of 'CC' for its EUR100m notes, due in October 2011, on RWN. Petrol AD's Recovery rating is 'RR4'.
The rating action is mainly driven by Petrol AD's weak liquidity position and rising refinancing risk, predominantly related to the EUR100m notes. Petrol AD's IDR had previously been assigned a Negative Outlook following a rating downgrade in July 2009.
Fitch believes that Petrol AD, together with its subsidiaries, has insufficient liquidity. As at end-June 2010, the group had cash of BGN5m and no available undrawn committed liquidity facilities, against short-term debt of BGN23m, including BGN11m of accrued interest on the notes. Fitch is also concerned about Petrol AD's refinancing risk given its weak financial profile. The agency assumes in its projections that the cash spent on the purchase of Petrol AD shares in 2008 (BGN294m or EUR150m) - following a disposal of an important part of Petrol AD's petrol station network to Lukoil Bulgaria EOOD - will not be returned to Petrol AD. Therefore, this cash will not be available to support the company's financial position before the notes mature.
Fitch understands that Petrol AD plans to redeem the EUR100m notes by either raising new bank funding or, alternatively, through a disposal of assets.
The agency is additionally concerned about Petrol AD's weak corporate governance standards. The negative pressure on Petrol AD's ratings may rise further if the dispute between the two main shareholders of Petrol Holding, the owner of Petrol AD, results in a major negative impact on the company's Business and financial profile, including its liquidity position.
Petrol AD's net debt/EBITDA of 13.2x at end-December 2009, and funds from operations (FFO) interest coverage of only 0.6x, compare poorly with other oil refining and/or fuel-marketing companies rated by Fitch.
Petrol AD is the leading fuel distributor in Bulgaria. It operates a wholesale and retail distribution Business with domestic market shares of 20% and 15% respectively (2009 data). Its retail network consisted of 392 petrol stations at end-2009."
(1 euro = 1.95583 Bulgarian levs)
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