Fitch rates PKN Orlen bonds BBB-

Fitch Ratings said it assigned Orlen Capital AB (publ)'s proposed bonds an expected senior unsecured rating of BBB-(EXP).

Polski Koncern Naftowy Orlen SA (PKN Orlen SA; BBB-/stable) will unconditionally and irrevocably guarantee the bonds.

The bonds are rated at the same level as PKN's issuer default rating to reflect the guarantee and their ranking as senior unsecured obligations of the company.

Fitch said PKN's ratings reflect the company's business diversification with operations in the refining, petrochemical and fuel retail sectors, its strong position in the Polish market and an improved financial profile with funds from operations net adjusted leverage of 2.5x in 2013 (including adjustments for inventory-holding losses and sales of obligatory reserves of crude oil).

The ratings are mainly constrained by the cyclicality of the refining and petrochemical operations. Reported EBITDA under LIFO in first quarter 2014 was 1 billion Polish zloty, representing a 5% year-over-year increase, mainly on the back of strong results in the retail and petrochemical segments.

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