S&P affirms Magyar Olaj

Standard & Poor's said it affirmed its BBB- long-term corporate credit rating on Magyar Olaj- es Gazipari Rt. (MOL) and related special-purpose vehicle Magnolia Finance Ltd. and the BB long-term rating on the proposed €690 million hybrid notes to be issued by Magnolia. The outlook on both entities is stable.

The affirmation of the ratings follows a significant change in the terms and conditions of the proposed notes. The issue's margin-step, which occurs on March 2016 and quarterly thereafter, will increase by 2% instead of the 1% in the original terms, and S&P said the increase in margin step makes refinancing more likely in year 10, as the instrument is likely to be even less economically advantageous.

Due to the assessed low permanency of the issue, only minimal equity content has been assigned. S&P said it does not view the amount of equity as consistent with the intermediate amount required for an investment-grade company.

S&P said the ratings on MOL reflect its strong position in the Central and Eastern European oil refining market and strong financial profile, offset by some asset concentration risk, as MOL relies on only two refining assets.

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