CRISIL downgrades Bharat Oman Refineries loans

Cash flows inadequate to meet debt obligation

CRISIL has cut ratings on Bharat Oman Refineries Ltd’s (BORL) bank facilities to “A+” from “AA-“ as its net cash accruals will be insufficient to meet debt obligation in 2012-13 and 2013-14.

The cash flows will be inadequate to service debt obligation despite recent stabilisation of refinery operations, as reflected in capacity usage of over 100 per cent from October to December 2012.

CRISIL in a statement said it expects BORL’s joint venture partners Bharat Petroleum Corp Ltd (BPCL) and Oman Oil Company (OOC) will continue to support BORL to meet its debt obligations over the medium term.

BORL‘s shareholders, BPCL (50 per cent) and OOC (50 per cent), are also in the process of infusing Rs 1,000 crore over next three months in the company through compulsorily convertible debentures or other instrument of similar nature.

The capital infusion will be critical for sustaining BORL’s financial risk profile and financial flexibility, CRISIL said.

BORL’s financial risk profile is expected to remain weaker-than-earlier-expected. Its gearing deteriorated to around 22 times as on September 30, 2012 from 8.5 times as on March 31, 2012.

The operating performance was weak due to delay in ramp up of refinery operations. BORL reported negative earnings before interest, depreciation and tax of Rs 13 crore in the first half of 2012-13.

The ratings reflect enhanced and strong support from joint venture partners BPCL and OOC and expectations of stabilisation of commercial operations at refinery in the near term.