Fitch rates PKN notes BBB-

Fitch Ratings said it affirmed Polski Koncern Naftowy Orlen SA's (PKN) long- and short-term foreign-currency issuer default ratings at BBB- and F3, respectively, and assigned an expected BBB- rating to its planned €800 million bond issue.

The agency also assigned BBB- long-term and F3 short-term local-currency issuer default ratings and BBB- foreign- and local-currency senior unsecured ratings to the company.

The outlook is negative.

The agency said the ratings reflect the PKN group's high business risk profile as a pure refining and marketing company, which is partly mitigated by its leading position in the Polish fuel and petrochemicals market and above-average refining margins at its key Plock refinery in central Poland.

The ratings also take into account the group's high financial leverage for the rating level, driven by the expensive acquisition of Mazeikiu Nafta AB in December 2006 for $2.3 billion and planned sizeable capital expenditure for 2007-2012 of $7.4 billion, Fitch said, although management's financial policy is to keep the net debt-to-EBITDA ratio within a range of 1.5x to 2x range.

The negative outlook reflects Fitch's view that the ratings may be downgraded if PKN fails to reduce its leverage.

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