Fitch puts Lundin Energy on watch

Fitch Ratings said it placed Lundin Energy AB's long-term issuer default rating of BBB- on rating watch negative on the contemplated sale of the company's exploration and production business to Aker BP ASA. It has also placed the senior unsecured rating of the bonds issued by Lundin Energy Finance BV on rating watch positive.

“The RWN on the IDR reflects a significantly diminished scale and a change in the main focus of operations of Lundin upon completion of the transaction, as the company will only retain its renewable energy activity, which represents a very small portion of its current operations. Lundin will be debt-free, but is not expected to turn free cash flow (FCF)-positive until 2024,” Fitch said in a press release.

The agency said the resolution of the RWN may lead to a multi-notch downgrade and may take longer than six months.

Lundin Energy Finance's bonds are expected to become an obligation of a new group combining Lundin's and Aker BP's E&P assets. Aker BP is planning to either assume, or guarantee Lundin's outstanding notes, which supports the RWP, Fitch said.

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