Moody’s not necessarily right, Dr M says on Petronas downgrade

Moody’s has changed its outlook for Petronas from negative to stable.

KUALA LUMPUR: Dr Mahathir Mohamad today sought to downplay the significance of Moody’s downgrade of Petronas ratings as well as its change in outlook from negative to stable.

Speaking to reporters on the sidelines of the Asia Oil and Gas Conference at the KL Convention Centre here, he said Moody’s is free to make its own evaluations.

“That is Moody’s assessment. Moody’s may not necessarily be right. Sometimes, people make assessments which are not quite right.

“We cannot criticise them because they are free to make their assessments.

“From what we can see, based on what Petronas is doing, I am confident the downgrade will not affect Petronas.”

On whether Malaysia is ready to face a downgrade from credit rating agencies, Mahathir said they could go ahead and do so.

“We do not necessarily have to accept the opinions of these agencies,” he added.

Bernama recently reported that Moody’s had downgraded Petronas’ domestic issuer and foreign currency senior unsecured ratings from A1 to A2, and changed its outlook from negative to stable.

In a statement, the global rating agency said the national oil company’s credit metrics remain strong but that the lower ratings were due to its revised cross-sector methodology.

Moody’s senior vice-president, Vikas Halan, said the close credit linkages between the government and Petronas could not, under the revised methodology, support a rating for Petronas that is two notches higher than the Malaysian sovereign.

“The company’s ties to the sovereign create a potential for government interference that may have a negative impact on the company’s business profile or cash flow,” he said.

However, Halan said Petronas’ ratings can be maintained at one notch above the sovereign rating due to the company’s strong credit metrics, low dependence on the domestic economy (70% of revenue generated through exports and overseas) and superior access to international capital markets.