Rating Actions Taken On Two Trinidad Tobago Infrastructure Entities Following Sovereign Outlook Revision To Negative

Stocks and Financial Services Press Releases Wednesday December 30, 2015 09:11
BUENOS AIRES--30 Dec--Standard & Poor's

BUENOS AIRES (Standard & Poor's) Dec. 29, 2015--Standard & Poor's RatingsServices said today it revised its outlook on The National Gas Co. of Trinidad& Tobago Ltd. (NGC) to negative from stable and affirmed the 'A-' rating onit. At the same time, we affirmed our 'BB' rating on Petroleum Co of Trinidad& Tobago Ltd. (Petrotrin). The outlook on Petrotrin remains stable.

The outlook revision on NGC reflects the similar action on T&T (see "Trinidadand Tobago Outlook Revised To Negative From Stable On Risks From Low EnergyPrices; 'A/A-1' Ratings Affirmed," published Dec. 24, 2015) and is in linewith our criteria for GREs. We view the likelihood of extraordinary governmentsupport to NGC as "very high," which, under our criteria, allowed us to assignthree notches of support to its stand-alone credit profile (SACP). Wecurrently expect that we would downgrade NGC if we took a similar action onthe sovereign.

On the contrary, absent a reassessment of the likelihood of extraordinarygovernment support or a downgrade on the ratings on T&T to 'BB+' orlower--which we don't expect in the short to intermediate term--we woulddowngrade Petrotrin only if its SACP were to fall to the 'ccc' category.

For NGC, the negative outlook indicates that we would downgrade it following asimilar rating action on the sovereign in the next 12-24 months. In addition,a one-notch downward revision of the company's SACP would lead to a similaraction on the ratings on NGC. Given that we don't expect fundamental changesin our assessment of the company's business risk profile, we could lower theSACP as a result of a revision of the financial risk profile assessment to"intermediate" or lower. Although this is unlikely in the near term, givenNGC's ample room for additional debt, we could lower the profile assessment ifthe company takes on significant debt.

We could revise the outlook to stable on NGC if we were to do so for T&T. Inaddition, and although unlikely in the next to two to three years, we wouldupgrade NGC if we raised the ratings on T&T to 'AA-' and revised the company'sSACP to 'a-'.

For Petrotrin, the stable outlook reflects our expectation that it willmaintain its good competitive position in the Caribbean market for refined oilproducts, our expectation for ongoing and extraordinary government support ifneeded, an improvement in the company's refinery operations, and higher oil

prices for the next few years. Even if we were to downgrade T&T, we don'texpect a ratings change on Petrotrin, all else being equal.

We could downgrade Petrotrin in the next six months to one year if oil pricescontinue to decrease, leading us to assess the company's capital structure asunsustainable, and/or if we perceive a decline in government support thatleads us to believe liquidity could contract further. A deterioration of the

SACP would also trigger a downgrade.

Although unlikely in the near term, we could upgrade Petrotrin if its creditmetrics strengthen within the next 12 months and if it considerably improvesits liquidity position. Such a scenario would require debt to EBITDA below 5xand free operating cash flow to debt above 10%, which would mean animprovement in the company's core operations.

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