S&P downgrades Alon

Standard & Poor's said it lowered its corporate credit ratings on Alon USA Energy Inc. and Alon Refining Krotz Springs Inc. to B from B+, Alon USA's term loan B to B+ from BB- and Alon Krotz Springs' $216.5 million senior secured notes to B from B+. The recovery rating remains 2 for the loan and 3 for the notes.

The outlook is stable.

Alon did not generate any EBITDA in the second quarter of 2010. Operational setbacks at the Krotz Springs refinery following an extended turnaround prevented the asset from generating any operating income in the second quarter, the agency said, and the rating actions reflect the inability of Alon to benefit from the improved refining conditions in the period.

The downgrade also incorporates the weak refining conditions, high inventory levels of refined products and S&P's concerns as to when the U.S. economy will recover and thus lead to better demand for refined products, the agency said.

The stable outlook reflects S&P's expectations that parent company Alon Israel Oil Co. Ltd. will continue to provide financial support and that the company's third-quarter operations will improve compared with previous quarters.

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