Fitch Ratings revises Rompetrol�s outlook to negative

Fitch Ratings revised Rompetrol’s outlook to negative from stable, on weak operating cash flow and profitability in first nine months of 2008. The financial rating agency has also affirmed rating for long term foreign currency issuer default at ‘B+’.

The outlook revision for the group is due to the low operating cash flow and profit margins reported for first nine months this year, high financial leverage, tight interest coverage and high short-term refinancing risks, in the context of weak liquidity of the company, said Fitch.

Rompetrol Group’s rating reflects its weak standalone credit profile balanced against its strong strategic and operational ties with its Kazakhstan-based parent company, KazMunaiGaz, which is assigned with a better rating (‘BBB-‘/F3’, negative outlook).

The rating also reflects the support from KazMunaiGaz and from the company’s minority shareholder, Rompetrol Holding SA in the form of subordinated shareholder loans, currently amounting to 533 million US dollars. In the future, Fitch expects the credit volume to enhance.

Fitch expects Rompetrol’s cash flow for 2008 to be negative, given the company’s weak funds from operations and sizeable capital expenditure. The company plans to increase its capital expenditure for 2009-2013 up to 1 billion US dollars in order to retool Petromidia refinery, to increase its annual output to 5 million tons from 4 million until 2010 and to expand fuel retail operation in Romania and neighboring countries.

In the context of market conditions and the company’s debt level, some additional projects may be included in the capital expenditure plan. Rompetrol Group is planning to fund the capital expenditure program from its cash flow from operations and additional shareholder loans.

Translated by Camelia Oancea

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