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10 Feb 2000
MOODY'S RAISES TOTALFINA-ELF'S SENIOR RATINGS TO Aa2
Moody's Investors Service today upgraded the Aa3 long-term senior unsecured ratings of TotalFina SA and Elf Aquitaine SA to Aa2 following the announcement of the European Commission's conditional approval for the merger of the two companies. The agency also raised the A1 long-term senior unsecured ratings of PetroFina SA and Fina Oil and Chemical Company (FOCC) to the same level. Additionally, the ratings of the Money Market Preferred Stock of TotalFina's wholly-owned subsidiaries, TECI, TERFIN and Total American Holdings, Inc,. were raised from "aa3" to "aa2". The outlook on all ratings is stable.
The combined TotalFina-Elf group is the fourth largest publicly-owned oil and gas company in the world in terms of pro forma proved reserves with some 10.5 billion barrels of oil equivalent. The upgrade to Aa2 reflects the share-financed acquisition, the scale of the enlarged group and its global presence, the good strategic fit between the companies, the improved reserve portfolio balance, the potential for production growth over the medium term, the strong position the new group holds in European downstream, significant expected productivity enhancements through the integration of the two groups, and anticipated reduced post-disposal debt levels, Moody's said. The conditions imposed by the European Commission, while being somewhat more stringent than expected, will not have a materially negative impact on the combined group.
In Exploration and Production TotalFina-Elf has a major, balanced global presence with substantial reserves and a fast-growing production profile. TotalFina's strong upstream position in the low-cost Middle East is complemented by Elf Aquitaine's large-reserve interests in West Africa. While the new group is heavily exposed to country risk and will be required to invest substantial amounts of capex to develop its reserves, it has improved reserve diversification as a result of the merger and a far more rapidly growing production profile compared with its competitors, anticipating a 40% growth in production to around 2.8 million barrels per day by 2005. In Refining and Marketing TotalFina-Elf is the leading refiner in Europe with significant savings opportunities from the merger in this over-supplied and cost-sensitive segment, and holds approximately 12% of the total European service station market. The combined entity is also a major force in the Chemicals industry with strong global positions in several important products and the potential to focus on developing its presence in higher margin specialty chemicals and intermediates.
The merger of TotalFina and Elf Aquitaine will result in increased revenues from growing upstream production, improved margins through synergistic cost-savings and better integration, and the potential to reduce debt through strengthened cash flow and the disposal of non-core businesses such as the progressive sale of the group's holding in Sanofi-Synthelabo. These benefits and TotalFina's stated goal of a net gearing target of 35% underpin the upgrade to Aa2.
While Elf Aquitaine's bank debt will be refinanced by TotalFina, it is as yet unclear whether the bonds of Elf Aquitaine will be transferred to TotalFina, guaranteed by the acquiring company, or left at the Elf Aquitaine level without guarantee. Even in the latter case, Moody's believes TotalFina will have a clear commercial imperative to support the debt of Elf Aquitaine. The ratings of the PetroFina and FOCC bonds have been raised to the same level for similar reasons.
TotalFina-Elf, headquartered in Paris, France, formed from the merger of TotalFina SA and Elf Aquitaine SA, is the fourth largest integrated multinational oil and gas company in the world with activities in all aspects of the petroleum industry. PetroFina SA, Fina Oil and Chemical Company (FOCC), Total Energy Capital Inc (TECI) and Total Energy Resource Finance, Inc (TERFIN) are subsidiaries of TotalFina SA.
No Related Data.
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