Moody's cuts Valero outlook to negative

Moody's Investors Service said it changed Valero Energy Corp.'s outlook to negative from stable.

The agency said it also affirmed Valero's existing Baa2 senior unsecured note ratings.

The move to a negative outlook reflects the ratings risk if, over the next 12 months, down-cycle weakness fails to recover sufficiently to be compatible with Valero's leverage and ratings, the agency noted, adding that if it appears that second and third quarter 2010 margins, which are normally strong with the summer driving season, will instead be comparable to last year's weak second- and third-quarter margins, the ratings may be placed under review for downgrade.

"Valero's ratings remain supported by still ample expected 2010 liquidity as well as the earnings power of its refining portfolio should second and third quarter 2010 refined product margins modestly seasonally recover and vital oil price differentials modestly improve from present ranges," said Moody's vice president and senior credit officer Andrew Oram.

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