Moody's Investors Service on Tuesday said it has placed state-run Bharat Petroleum Corp Ltd's (BPCL) rating on review for downgrade after the government decided to privatise the country's company.

"The review for downgrade follows the government of India's (Baa2 negative) decision to sell its entire 53.29 per cent stake in BPCL and to transfer management control of the company to a strategic buyer," Moody's said in a report.

The report further said it assumes that BPCL's status as a government owned entity in India will continue until at least the conclusion of the proposed sale.

The sale by the government will also trigger a change of control in some of BPCL's bonds, which will require the company to redeem its bonds within 45 days of the change of control being triggered, according to Moody's.

"There is no ratings condition attached to the put option for bondholders. Further, BPCL's foreign currency bondholders could also decide to treat the government stake falling below 50 per cent as an event of default, which would result in bonds being immediately repayable. Any bond redemption will significantly increase BPCL's refinancing risk," the US ratings multinational added.

The report further said that as of November 22, 2019, BPCL had $2.3 billion of foreign currency bonds outstanding. The company had cash and cash equivalent of Rs 9.7 billion as of 30 September 2019.

As part of its decision to sell its stake in BPCL, the government also announced that the company will also sell its 61.65 per cent in Numaligarh Refinery Ltd to other government-owned oil and gas companies.

The valuation of the stake and the use of proceeds from such sale is yet to be decided. The sale will also reduce BPCL's capital spending as it is one of the largest projects that the company is working on.

BPCL has been operating under government control and its business strategy has been in line with government policy and objectives.

A change in ownership could result in the company revising its business strategy or financial policies, which could have implications for its standalone profile, Moody's said.



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