S&P Places PetroKazakhstan On CW Pos On CNPC Takeover
August 24, 2005
Standard & Poor's Ratings Services said today it placed its 'B+' long-term corporate credit rating on PetroKazakhstan Inc. (PKZ), a vertically integrated oil company operating in Kazakhstan, on CreditWatch with positive implications, following China National Petroleum Corporation's (CNPC; not rated) offer to acquire PKZ.
"The CreditWatch placement reflects the potential benefits of the acquisition by an entity with a likely stronger credit profile, pro forma for the additional debt; the potential for a degree of implicit parental support; and the possibility that the new parent's bargaining power will help to resolve various tax, regulatory, and corporate governance issues currently affecting PKZ," said Standard & Poor's credit analyst Elena Anankina.
The CreditWatch also reflects lack of clarity about several key issues that will drive the future rating level:
The status of PKZ's debt in the group structure. The risks related to change of control provisions in PKZ's debt are, however, mitigated by the company's strong liquidity position.
CNPC's strategy regarding PKZ and the extent to which its operations and financials will be integrated in the broader group structure. Standard & Poor's will also closely monitor any changes in PKZ's financial policy that may affect its stand-alone creditworthiness, particularly concerning investments, sales diversification, pricing, and dividends.
Any future developments regarding tax claims, regulatory charges, and the ongoing conflict with Turgai, PKZ's 50:50 joint venture with LUKoil OAO (BB/Positive/--).
"Standard & Poor's expects to resolve the CreditWatch once the transaction has closed and the key issues have been clarified," added Ms. Anankina.
We note that the takeover is subject to approval by shareholders and various regulatory authorities, and that PKZ's board of directors has the right to accept a proposal superior to the current termination fee of $125 million. The CreditWatch placement does not reflect the potential for other offers.
Company — PetroKazakhstan
Full namePetroKazakhstan Inc.
IndustryOil and gas