S&P rates Thai Oil notes BBB

Standard & Poor's said it assigned a BBB rating to Thai Oil PCL's proposed issuance of senior unsecured notes.

The agency also affirmed its BBB long-term corporate credit rating and axA Asean regional scale rating, along with the BBB rating on the company's $350 million senior unsecured notes due 2015.

The outlook is stable.

The ratings reflect an expectation that the company's credit metrics will gradually improve by the middle of 2014 after weakening in 2013, S&P said.

The agency said it believes higher leverage from the proposed debt issue and lower operating cash flows from thinner margins will contribute to the deterioration in credit metrics.

Thinner refinery margins will particularly affect cash flow because its refinery accounts for more than half of the company's marketing gross integrated margin, S&P said.

Thai Oil's leverage is expected to peak in 2013 with a ratio of debt-to-EBITDA of 3.6x, the agency added. This ratio is somewhat weak for the company's intermediate financial risk profile.

The ratings also consider its favorable cost structure, flexibility in feedstock selection and strong domestic market position, S&P said.

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