(Alliance News) - Moody's Investors Service on Monday has affirmed the Baa3 long-term issuer rating of FTSE 250-listed Vivo Energy PLC, but changed the outlook to negative from stable.
Moody's also affirmed the Baa3 instrument rating assigned to the USD350 million guaranteed senior unsecured notes due 2027 issued by Vivo Energy Investments BV, a subsidiary of Vivo Energy.
The ratings agency explained that the negative rating outlook reflects the weakening sovereign credit quality across Vivo Energy's countries of operation, including Vivo Energy's top three largest markets, namely Morocco, Kenya and Tunisia.
"The change of the rating outlook to negative primarily reflects Vivo Energy's increased sovereign risk exposure. This is reflected by the recent change in rating outlook on the Ba1 rating of Morocco, Vivo Energy's largest market, as well as a number of recent negative rating outlooks assigned to other African countries where Vivo operates. This exposes Vivo Energy to increased sovereign risks and greater uncertainty around governments' responses to higher debt burdens and a slowing growth environment triggered by the spread of the coronavirus," said Dion Bate, a Moody's vice president.
"The affirmation of Vivo Energy's Baa3 rating, however, recognises the company's broad geographical diversification, a strong financial profile with leverage expected to decrease this year and good liquidity, providing a degree of insulation against sudden market disruptions," added Bate.
Moody's said the Baa3 issuer rating also continues to recognise Vivo Energy's robust business profile, as shown by its limited exposure to petroleum product price risk, the fact that most of its markets are regulated with absolute margins granted on fuel prices, the strength of the Shell and Engen brands in Africa, and the critical socioeconomic role that fuel retailers play in African countries.
In addition, the Baa3 rating takes into account the company's conservative financial policy and a good liquidity, Moody's noted. This, in combination with low exposure to any single country, helps insulate the business from single market event risks.
Vivo Energy shares closed 2.4% higher in London on Monday at 84.70 pence each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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