Moody's rates Petrol AD note B3

Moody's Investors Service said it assigned B2 long-term foreign- and local-currency corporate family ratings to Bulgaria-based Petrol AD and a provisional B3 foreign-currency senior unsecured rating to the company's proposed €100 million eurobond notes.

The outlook is stable.

The agency said Petrol's ratings reflect the group's leading position in fuel distribution in Bulgaria with around 19% of the fuel retail market and 23% of the wholesale market; its strong asset base as Petrol owns the only nationwide retail network, three import terminals and storage capacity representing 75% of the country's capacity combined with a strong supply chain; good growth opportunities with Bulgaria's growing economy and the expected fuel retail market consolidation; and expected improvement in its cash flow generation due to its modernization program and the expansion of its franchising agreements with independent retailers.

Petrol's ratings are constrained by the group's long-term dependence on OAO Lukoil for fuel supply and for the financing of a large part of its retail network investments to date, increasing competition from international players leading to declining margins, a large investment program to modernize its retail network and its storage capacity and a lack of integration and diversification, Moody's said.

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