Moody’s rates ONGC Videsh bonds Baa2

Moody's Investors Service said it assigned a Baa2 rating to the proposed foreign currency senior unsecured bonds to be issued by ONGC Videsh Vankorneft Pte. Ltd., a wholly owned subsidiary of Oil and Natural Gas Corp. Ltd. (ONGC; foreign currency Baa2 stable; local currency Baa1 stable).

The bonds will be unconditionally and irrevocably guaranteed by Oil and Natural Gas.

The outlook is stable.

The proposed foreign currency bonds are rated at the same level as Oil and Natural Gas’ foreign currency issuer ratings because the bonds are unconditionally and irrevocably guaranteed by Oil and Natural Gas and the guarantee is pari passu to all senior unsecured obligations of Oil and Natural Gas, Moody’s said. Secured consolidated debt at Oil and Natural Gas accounted for about 4.3% of its consolidated assets as of March 2016.

"Even though the guaranteed amount has been restricted to 109% of the principal amount of the bonds outstanding, we view it as sufficient to cover the amounts due to bondholders. The restriction of a guarantee to a finite amount is driven by regulations in India, which do not allow open-ended guarantees for obligations of offshore subsidiaries, rather than an actual intention on ONGC's part to restrict its liability under the bonds," Moody's vice president and senior credit officer Vikas Halan said in a news release.

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