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Rating Action:

Moody's stabilizes Puma's outlook; affirms B1 corporate family rating

11 May 2021

London, 11 May 2021 -- Moody's Investors Service ("Moody's") has today changed Puma Energy Holdings Pte. Ltd's (Puma, the company) outlook to stable from negative. Concurrently, Moody's has affirmed the B1 corporate family rating and the B1-PD probability of default rating of Puma and the B1 rating of the backed senior unsecured notes issued by Puma International Financing S.A. and guaranteed by Puma due in 2024 and 2026. Puma International Financing S.A.'s outlook has also been changed to stable from negative.

RATINGS RATIONALE

Today's outlook stabilization reflects the €500 million rights issue, that was subscribed by Trafigura and a small number of minority investors, received in April 2021 and since then applied towards the repayment of the 3y Term Loan, outstanding for $500 million, that was maturing in May 2021.

The rights issue is in the form of a mandatory convertible loan, with a maturity in April 2029, and its conversion into equity is subject to 13 regulatory/merger approvals, of which 3 have already been secured. The rating action also reflects the acquisition of Sonangol's 31.5% stake in Puma by Trafigura and the disposal of the Angolan activities to Sonangol, both for a $600 million consideration.

These transactions are subject to regulatory approvals in a number of jurisdictions and closings of these transactions are expected in by the end of 2021. Trafigura's stake in Puma is expected to increase to more than 90% after the conversion of the mandatory convertible loan into equity.

The rating agency views positively the envisaged disposal of Angolan operations, which used to represent around 27% of the company's EBITDA in 2017 and have been performing weakly since then (Angola accounted for approximately 5% of Puma's EBITDA in 2020), although this reduces the diversification and the absolute profitability and cash flow generation of Puma.

Today's rating action recognizes an improvement in the adjusted leverage of Puma by approximately 1.0x, pro-forma for the rights issue, and a clear improvement in the liquidity profile, as Puma will have limited debt coming due until the maturity of the $600 million in October 2024.

In 2021, Moody's expects the company's Moody's adjusted EBITDA to decline to approximately $600-620 million, as the continuous recovery in volumes and the reduction of fixed costs, will not offset the impact of the disposal of Angola and the $82 million extraordinary support that was granted by the shareholders in 2020.

The rating action also reflects the recovery in the volumes of fuel and refined oil products sold by the company towards the levels seen before the coronavirus outbreak, with the exception of Aviation fuel that will take longer to recover. Also, whilst Moody's highlights the lack of visibility of the use of the $600 million proceeds of the disposal of the Angolan activities, the stabilization of the outlook is predicated on the expectation that these proceeds are used either for debt repayment, to reinvest in the business, supporting the liquidity profile of Puma.

Moody's continues to highlight the significant exposure of Puma to emerging markets, although the company provides products that are considered a necessity and in many markets subject to fully or semi-regulated pricing regimes, although the company is not immune from macroeconomic shocks, as confirmed by the experienced in Angola in recent years.

LIQUIDITY

Puma's liquidity is adequate despite its lack of access to multi-year committed bank facilities.

At the end of 2020, Puma had access to approximately $507 million of cash and cash equivalents, of which $94 million were restricted. Puma has recently renewed committed bank credit lines of $606 million, expiring in May 2022, to which Moody's continues to give limited credit in its liquidity assessment.

Puma continues to have access to a $500 million committed shareholder loan from Trafigura, which remains undrawn and matures in September 2023, but Moody's cautions that this loan is dependent on the credit quality of Trafigura, and therefore gives a lower credit to it in its liquidity assessment than the one given to a traditional revolving credit facility (RCF) granted by a banking group.

The envisaged rights issue will also have a positive a positive impact as the headroom under the net worth and net leverage covenants, with the former being limited, will increase.

ESG CONSIDERATIONS

Following conclusion of the rights issue, Trafigura will hold over 90% of the capital of Puma and it will start consolidating Puma in its financial accounts. In this context, Moody's notes that any material weakening or strengthening of Trafigura's credit profile may have an effect on Puma's rating.

Trafigura supplies about half of the refined oil products distributed and marketed by Puma, which also uses its parent's trading platforms to hedge its fuel inventories.

Moody's highlights that there is limited visibility on confirmation of the financial policy, in addition to the management strategy, following the change in control and that it expects more clarity after the closing of the rights issue. In that regard, Moody's also highlights the unexpected resignation of the CEO, although it assumes that any related decision will be taken in accordance with the chosen management strategy and financial policy.

OUTLOOK

The stable outlook reflects our expectation that Puma's operating profitability will be broadly stable on a comparable basis in 2021, as the volumes of fuel sold continue to return to the levels seen before the coronavirus pandemic.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The ratings may be downgraded should Puma fail to (i) achieve a material and sustainable recovery in operating profitability; (ii) reduce financial leverage after its planned divestments so that Moody's-adjusted total debt to EBITDA falls below 5x in the next 12 months; or (iii) maintain adequate liquidity, including insufficiently pro-active management of its debt maturity profile.

A rating upgrade would require: (i) some material strengthening in the group's business profile underpinning a sustained improvement in operating profitability and (ii) some permanent deleveraging ensuring that Moody's-adjusted total debt to EBITDA keeps sustainably below 4x.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Retail Industry published in May 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1120379. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

Puma Energy Holdings Pte. Ltd ("Puma ") is an integrated midstream and downstream oil products group active in Africa, Latin America, North East Europe, the Middle East and Asia-Pacific. Trafigura Beheer B.V., a global commodity and logistics firm, established Puma in 1997 as a storage and distribution network in Central America, and the company has since grown into a global network operating across 43 countries worldwide, with approximately 7.6 million cubic metres of storage capacity and a network of approximately 3,000 retail service stations across Africa, Latin America, Asia and Australia. In 2020, Puma sold 20.1 million cubic metres of oil products and its facilities handled around 14.5 million cubic metres of petroleum products.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Danilo Ruocco
Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Peter Firth
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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