Wednesday, August 10

Petronas’ fundamentals intact despite Fitch downgrade

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KUCHING: Petroliam Nasional Bhd (Petronas) reiterated that its strong fundamentals remain in tact in spite of Fitch Ratings (Fitch) downgrading Petronas’ long term foreign and local currency issuer default ratings (IDRs) to BBB+ (outlook stable) from A- (outlook negative).

The revision of the credit ratings was made following the downgrade of Malaysia’s sovereign rating to BBB+ (outlook stable) from A- (outlook negative) on December 4, 2020.

“Under Fitch’s government-related entities tating criteria, Petronas’ ratings continue to be capped to that of the sovereign so long as the company sustainably generates more than 10 per cent of the revenues of the government,” the group said in a statement today.

“Petronas has accounted for more than 15 per cent of the Malaysian state’s revenue over the last five years.

“Petronas’ Standalone Credit Profile (SCP) as assessed by Fitch has remained unchanged, since 2016, at ‘aa-‘, which is 4 notches above that of the Sovereign compared to previous 3 notches above.

“The ‘aa-‘ SCP is maintained on the back of Petronas’ strong financial and business profile. Petronas has been in a net cash position since 2006 and the lowest through-the-cycle leverage and highest interest-coverage ratio among ‘AA-‘ rated peers.”

Late Tuesday, Fitch downgraded Petronas’ long-term foreign- and local-currency issuer default ratings (IDRs) to ‘BBB+’ following the downgrade of Malaysia’s IDR to ‘BBB+’ from ‘A-‘ on December 4, 2020, with the outlook at stable.

Fitch has also affirmed Petronas’ short-term foreign-currency IDR at ‘F1’. At the same time, Fitch has also downgraded the ratings on the oil and gas (O&G) firm’s foreign-currency senior unsecured debt and debt issued by Petronas Capital Ltd and guaranteed by Petronas to ‘BBB+’ from ‘A-‘.

The national O&G company also added it was able to maintain its strong financial profile despite the economic downturn and disruptions following the COVID-19 pandemic.

“The ‘aa-’ SCP also reflects Petronas’ strong business profile, its position as a large-scale and fully integrated oil and gas producer as well as diverse operations in upstream, liquefied natural gas (LNG), and downstream refining and petrochemicals.

“Petronas would like to emphasise that our strong fundamentals remain unchanged.

“Petronas has consistently maintained a conservative financial policy, stringent capital discipline and focus on cost optimisation towards ensuring preservation of liquidity which has enabled the company to withstand volatility and shocks in the market.”