Moody's Investors Service has today placed the Ba3 corporate family rating for PetroKazakhstan Inc. ("PKZ") on review for possible upgrade. The company, which is the guarantor of the US$125 million notes issued by PetroKazakhstan Finance B.V., has announced on Monday, the 22nd of August, that it has entered into an Arrangement Agreement with CNPC International Ltd ("CNPCI") which has offered to buy all outstanding PKZ common shares for USD 4.2 billion in cash.
Moody's rating action is in response to the expectation that a successful acquisition will have a positive impact on PKZ's rating considering the stronger credit profile of China National Petroleum Corporation ("CNPC") which is the 100% parent company of CNPCI. The closure of the transaction is expected in October 2005.
In case of a successful closure of the proposed acquisition, the review will focus on the level of operational and financial integration of PKZ into the acquirer's group. It is likely that the rating can be lifted by 3 or more notches even without a formal support arrangement. With regard to the impact of the transaction on PKZ's outstanding notes which include a change of control clause, Moody's will focus on the company's liquidity situation, debt allocation and funding policy in the new group. The agency will also monitor the development of PKZ's currently challenging legal and regulatory situation in light of the new owner.
PetroKazahstan Finance B.V. is a special-purpose financing vehicle and an indirect wholly owned subsidiary of PetroKazahstan, Inc, formerly known as Hurricane Hydrocarbons Ltd., headquartered in Calgary, Alberta, in Canada. PKZ is an integrated oil company which operates in central and southern Kazakhstan. The other guarantors are PetroKazahstan's principal up- and downstream operating subsidiaries in Kazakhstan.