Moody's rates Thai Oil bonds Baa1

Moody's Investors Service said it assigned a provisional foreign currency long-term rating of Baa1 to the new dollar-denominated bonds of Thai Oil Public Co. Ltd.

The outlook is stable.

The bonds are intended to refinance existing debt.

Moody's said the Baa1 rating reflects Thai Oil's strong position in the domestic oil refining sector; the modern and efficient nature of its refinery, which drives a competitive cost position; very strong debt coverage measures, driven by a favorable operating environment and debt reduction; and Moody's expectation of free cash flow generation over the next 2-3 years, based on the company's capital investment plan.

At the same time, the rating reflects the high cyclicality inherent in the oil refining industry, limited downstream integration into oil marketing and exposure to a single-site complex. Other risk factors include execution risk related to the company's brownfield capacity expansion and customer concentration issues, the agency said.

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