Moody's rates Cepsa Finance notes Baa3

Moody's Investors Service said it assigned a Baa3 senior unsecured rating to Cepsa Finance, SAU, a guaranteed subsidiary of Compania Espanola de Petroleos, SAU (Cepsa), as well as a Baa3 rating to the senior unsecured notes issued by Cepsa Finance.

The outlook is stable.

The rating of the notes issued by Cepsa Finance is in line with the Baa3 issuer rating of Cepsa, reflecting that Cepsa Finance is a guaranteed subsidiary of Cepsa, Moody's said.

The notes are senior unsecured and Moody's said it understands that they rank pari passu with other unsecured legacy debt instruments in the Cepsa group that constitute the majority of the capital structure, the agency said.

The proceeds will be used to repay the legacy debt instruments and hence the issuance will not lead to an increase in Cepsa's leverage, Moody's said.

Cepsa's Baa3 rating is primarily supported by the company's business model with a combination of upstream and downstream operations that has led to a relatively stable EBITDA generation over the past five years despite substantial volatility of crude oil prices, the agency said.

The ratings also reflect the company's high level of vertical integration between the segments, Moody's said.

The major constraints to the ratings are the company's relatively small scale and generally less diversified business profile compared to other integrated oil and gas majors, the agency said.

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