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Moody’s Cuts Motiva Enterprises L-T Debt To A2

The Wall Street Journal: Moody’s Cuts Motiva Enterprises L-T Debt To A2

“The long-term rating downgrade primarily reflects the impact of Moody’s downgrade in May 2004 of Motiva’s 50% owner, Shell Oil”


July 30, 2004 4:44 p.m.

Posted 31 July 04

The following is a press release from Moody’s Investors Service:

New York, July 30, 2004 — Moody’s Investors Service downgraded Motiva Enterprises LLC’s long-term debt to A2 from A1 and confirmed the company’s Prime-1 commercial paper rating. The rating outlook is stable. Motiva Enterprises is a refining and marketing joint-venture owned 50% by Shell Oil Company (Aa2, stable) and 50% by Saudi Refining Inc. (not rated). Motiva is financed on a non-recourse basis to its owners. The long-term rating downgrade primarily reflects the impact of Moody’s downgrade in May 2004 of Motiva’s 50% owner, Shell Oil Company, to Aa2 from Aa1.

The Motiva rating action is tied to the resolution of the rating review of Shell Oil, whose Issuer Rating was today confirmed at Aa2 with a stable outlook, and to the review of Shell Oil’s ultimate owners, the Royal Dutch/Shell Group, whose guaranteed subsidiary ratings were confirmed at Aa1 with a negative outlook. The downgrade of Motiva’s rating to A2 from A1 reflects the marginally weaker credit quality of the attributed Shell Oil support in the wake of its downgrade earlier in the year. Motiva benefits from ratings uplift above its fundamental credit quality as an independent refining and marketing company, based in large part on its significance to and operational integration as a refining and flagship retail presence within Shell Oil Company’s downstream portfolio, as well as on the liquidity and potential capital support implicit in the owners’ flexible distribution policy.

Moody’s notes that Motiva’s stable rating outlook and Prime-1 commercial paper rating and liquidity are bolstered by recent strong operating cash flows and by the sale of its Delaware City refinery. Operating cash flow and the asset sales proceeds have enabled Motiva to reduce both on- and off-balance-sheet debt and to more readily fund sizable near-term required environmental spending and new growth projects, such as the recently announced lube base oil plant expansion at the refinery in Port Arthur, Texas. In addition, management’s desire to optimize Motiva’s capital structure and financial leverage could result in near-term increased distributions and possible re-leveraging of the balance sheet. However, Moody’s stable rating outlook is based on the expectation that Motiva’s owners will continue to manage distributions so as to maintain a sound financial position.

Motiva Enterprises LLC is headquartered in Houston, Texas.

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