Fitch rates Petrol AD note B-

Fitch Ratings said it assigned B- senior unsecured debt and issuer default ratings to Bulgaria-based Petrol AD and a B- rating with a recovery rating of RR4 to the company's upcoming issue of €100 million guaranteed senior unsecured notes.

Of the proceeds from the new notes, €74 million will be used to refinance a majority of Petrol's existing debt and €26 million will be used to provide liquidity for future capital expenditure. As a result, the average debt maturity at Petrol will significantly increase.

The agency said the ratings reflects Petrol's strong position in Bulgaria's fuel retail and wholesale sectors, its robust short-term liquidity following the planned €100 million notes issue and its flexibility in terms of capital expenditure and credit enhancement for the Petrol AD group provided through the terms of the notes.

More positively, Fitch does not expect any material impact to arise from the various potential contractual breaches by Petrol in relation to the group's main fuel supplier, Lukoil Bulgaria. This view is based on the legal counsel provided by Petrol, the commercial benefits for Lukoil from its supply arrangement with Petrol and Petrol's capacity to source alternative supply. The agency also does not see any material impact arising from Petrol's technical default on a BGN15 million bond maturing in 2008 because legal counsel has concluded that neither acceleration nor recourse to guarantor Petrol Holding AD is available to the existing bondholders.

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