Fitch: PKN Orlen outlook negative

Fitch Ratings said it affirmed Polski Koncern Naftowy Orlen SA's long-term foreign- and local-currency issuer default ratings at BBB- and its short-term foreign- and local-currency issuer default ratings at F3.

The outlook is negative.

The agency said the rating action reflects the decision of shareholders at the general meeting on Friday to vote against a PKN management board proposal not to pay dividends in 2008. The board recommended that no dividend be paid due to the company's substantial capital expenditure plan, high financial leverage and management's target of keeping leverage within a range of 1.5 to 2 times.

The company will now pay dividends of 693 million Polish zlotych for the year 2007, resulting in a 25% dividend payout ratio.

While the dividend to be paid in 2008 is not likely to increase PKN's balance sheet debt substantially, it remains to be seen if the recent shareholder decision will lead to a permanent change in PKN's dividend policy, the agency said. Fitch views a more generous dividend policy as likely to put pressure on the ratings if the ambitious capex program to be completed by 2012 is maintained.

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