Fitch Ratings has revised State Oil Company of the Azerbaijan Republic's (SOCAR) Outlook to Negative from Stable. Its Long-Term Issuer Default Rating (IDR) and senior unsecured rating have been affirmed at 'BB+', ONA reports citing Fitch Ratings.
The rating action reflects a recent similar action on the sovereign rating of Azerbaijan (BB+/Negative) as SOCAR is fully owned by the state and their ratings are equalised under Fitch's Government-Related Entities (GRE) Rating criteria. This is underpinned by state support provided to the company in the form of financial guarantees, cash contributions and equity injections, as well as SOCAR's social functions and its importance as a state vehicle for the development of oil and gas projects.
We continue to assess SOCAR's standalone credit profile (SCP) at 'b+' but leverage headroom in 2020-2021 is limited due to the slump in oil prices caused by the COVID-19 pandemic. Further sustained deterioration in SCP may result in the revision of our rating approach to notching down of SOCAR's IDR from the sovereign's rating under the GRE criteria, which also supports the Negative Outlook.