S&P rates ONGC notes BBB-

S&P said it assigned a BBB- long-term issue rating to a proposed issue of dollar-denominated senior unsecured notes by ONGC Videsh Vankorneft Pte. Ltd.

Oil and Natural Gas Corp. Ltd. (ONGC) will unconditionally and irrevocably guarantee the notes, S&P said.

The proposed notes will be used to refinance existing bridge loans incurred to acquire a 15% participating interest in CJSC Vankorneft, the agency said.

The proposed notes are considered as ONGC's debt obligation because the notes are issued by a 100%-owned subsidiary set up to raise funds for ONGC, S&P explained.

ONGC guarantees the notes up to 109% of the principal, the agency added.

The rating on the notes also is the same as the corporate credit rating on ONGC, S&P said.

The ratings reflect the company's strong competitive position as one of Asia's largest oil exploration and production companies with a long reserve life, stable production and good profitability, the agency said.

But ONGC's production is concentrated in India, particularly the Mumbai basin, and its expansion outside India is in higher-risk countries, S&P said.

The company also is exposed to negative government intervention, such as the sharing of government oil subsidies, especially in a high oil-price environment, the agency said.

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