Moody’s downgrades Petronas LNG’s ratings outlook to negative

Moody’s Investors Service has downgraded Petronas LNG Ltd’s (PLL) ratings outlook to “negative” from “stable”, following the same outlook revision for its parent company Petroliam Nasional Bhd’s (Petronas) yesterday. At the same time, the rating agency has affirmed PLL’s A3 foreign and local currency issuer ratings.

Moody’s said the changes reflects its negative outlook on Petronas’ ratings and its expectation of PLL’s continued strong support from and linkages with its ultimate parent.

PLL is 100%-owned by Petronas, which is in turn wholly-owned by the government.

Moody’s said given the negative ratings outlook, a ratings upgrade is unlikely and it will revise PLL’s ratings outlook to stable from negative only if Petronas’ ratings outlook is stabilised.

It said that PLL’s ratings will be downgraded if: Petronas’ rating is downgraded; there is a decrease in Petronas’ ownership of PLL; there is a reduction in Petronas’ supervision of and operational and financial support to PLL; or there is a material increase in PLL’s risk appetite.

PLL’s ratings were assigned using a top down approach by evaluating the company’s full ownership by Petronas, its strong operational and financial integration with Petronas, and the willingness and ability of Petronas to extend support to PLL in an event of distress.

Meanwhile, Moody’s assistant vice president and analyst Rachel Chua said PLL’s A3 ratings are positioned two notches below the A1 ratings of its ultimate parent.

She noted that PLL enjoys ongoing liquidity support from Petronas and it can draw from Petronas’ umbrella credit facility for liquidity management, adding Petronas has continued to support PLL financially through cash injections of almost $400 million over the past three years.

“Petronas’ support for PLL extends beyond financial assistance. Petronas also provides PLL with significant management support and oversight, including monthly reporting on risk and governance to a committee chaired by Petronas.

“PLL also has an integrated treasury function with Petronas, where its cash is held centrally by Petronas and cash flow requirements are shared with its parent,” she added.