Moody’s changes Petronas LNG rating outlook to negative

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KUALA LUMPUR (Nov 9): The rating outlook for Petronas LNG Ltd  (PLL) has been changed to negative from stable, Moody’s Investors Service announced today, following a similar outlook revision for its parent Petroliam Nasional Bhd (Petronas) on Thursday.

At the same time, Moody's affirmed PLL's A3 foreign and local currency issuer ratings.

In a statement today it explained the rating outlook is to reflect the negative outlook on the ratings of Petronas and the expectation of PPL’s continued strong support from linkages with it.

“PLL's A3 ratings are positioned two notches below the A1 ratings of its ultimate parent, Petronas. The top-down rating approach continues to reflect PLL's full ownership by, and strong operational and financial integration with Petronas,” said Rachel Chua, Moody's Assistant Vice President and Analyst.

Moody’s noted that PLL enjoys ongoing liquidity support from Petronas and it can draw from Petronas’ umbrella credit facility for liquidity management. “Petronas has continued to support PLL financially through cash injections of almost $400 million over the past three years,” it said, adding that Petronas’ support for PLL extends beyond financial assistance.

“Petronas also provides PLL with significant management support and oversight, including monthly reporting on risk and governance, to a committee chaired  by Petronas. PLL also has an integrated treasury function with Petronas, where its cash is held centrally by Petronas and cash flow requirements are shared  with its parent.”

As such, given the negative ratings outlook, a ratings upgrade is unlikely.

“Moody's will revise PLL's ratings outlook to stable from negative only if Petronas’ ratings outlook is stabilized,” it said.

On the possibility of a downward revision, it said factors include if Petronas’ rating is downgraded, if there is a decrease in Petronas’ ownership of PLL, if there is a reduction in Petronas’ supervision of and operational and financial support to PLL, or if there is a material increase in PLL's risk appetite.