SP, Moody's downgrade Petroplus rating

29th December 2011, Comments 0 comments

Credit ratings agencies Standard and Poor's and Moody's on Thursday downgraded their rating for oil refiner Petroplus after banks froze $1 billion (765,000 euros) in credit lines it needs to operate.

S&P cut the Swiss firm's rating from B to CCC+ and Moody's from B2 to Caa1.

Petroplus may not be able to make payments to continue operating, S&P's said in a statement explaining the downgrade, which it said reflected the "sharp deterioration in the company's liquidity position."

C level ratings are given to companies vulnerable to default.

Petroplus, Europe's largest independent oil refiner, said on Tuesday that lenders had frozen about $1 billion in uncommitted credit lines, threatening its ability to purchase crude.

The firm, which operates five refineries, said the credit lines are "critical" to allow its operating units to meet their obligations when due.

It is currently in talks with lenders to get the credit restored.

Moody's said that although Petroplus was supported by $1.05 billion of committed credit, this was expected to be drawn by the end of 2011.

"The failure to obtain continuing support from its bank syndicate means that Petroplus needs to accelerate its search for a sustainable operating model in the very difficult European refining market," said Moody's in a statement.

Petroplus did not disclose the reason for the freeze but the action comes against the backdrop of the eurozone crisis and banks tightening lending conditions.

© 2011 AFP

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