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Moodyâ€™s assigns Ba1 rating to upcoming Eurobond of SOCAR

27 January 2012 14:16 (UTC +04:00)

Moody’s expects that the Eurobond issuance will total up to USD500 million. The proceeds of the notes will constitute general unsecured and unsubordinated obligations of SOCAR. These will rank senior to all present and future subordinated obligations of the company and equal in right of payment to all its present and future unsecured and unsubordinated obligations. Moody’s anticipates that the maturity of the notes will not exceed five to seven years. Moreover, the rating agency expects that SOCAR will use the proceeds of the notes to partially fund its upstream and downstream activities, including financing of capital expenditure.
Moody’s does not expect the new bond issuance to have a material negative impact on SOCAR’s leverage profile and debt coverage ratios. On a pro-forma basis and assuming the company’s base-case oil price scenario of USD80/barrel of oil (bbl) Brent, Moody’s anticipates that SOCAR’s debt/EBITDA ratio will remain below 2.0x following the bond issuance. The rating agency also expects that (i) at the end of 2012, SOCAR’s debt/EBITDA ratio will return to 1.5x or below; and (ii) the company will remain within the financial thresholds set by Moody’s for the rating, i.e., debt/total book capitalization of below 30% and retained cash flow (RCF)/net adjusted debt of above 20%.