Galp Gas Natural Distribuicao Affirmed At 'BBB-' As Parent Starts Disposal Process With Low COVID-19 Impacts Expected

The credit quality of Galp Energía (Galp), the parent of Galp Gas Natural Distribuicao (GGND), is affected as oil prices and refining margins are experiencing multidecade lows, due to the combined effects of COVID-19 travel stoppages and unrestrained crude oil supply and price discounting. Galp is divesting its stake in GGND, and we believe this creates a strong incentive to maintain GGND's creditworthiness, despite current market conditions. A weakening of Galp's credit quality or a delay in the divestment process would negatively affect our rating on GGND. We expect minimal effects from COVID-19 on GGND, limited to a manageable, but negative, working capital that could be compensated through lowering dividends and reducing capital expenditure (capex). We are affirming our 'BBB-'

...May 21, 2020 - The credit quality of Galp Energfa (Galp), the parent of Galp Gas Natural Distribuicao (GGND), is affected as oil prices and refining margins are experiencing multidecade lows, due to the combined effects of COVID-19 travel stoppages and unrestrained crude oil supply and price discounting. - Galp is divesting its stake in GGND, and we believe this creates a strong incentive to maintain GGND's creditworthiness, despite current market conditions. - A weakening of Galp's credit quality or a delay in the divestment process would negatively affect our rating on GGND. - We expect minimal effects from COVID-19 on GGND, limited to a manageable, but negative, working capital that could be compensated through lowering dividends and reducing capital expenditure (capex). - We are affirming our '###-' rating on GGND. - Our stable outlook on GGND reflects our expectation that GGND will maintain adjusted funds from operations (FFO) to debt above 10%, despite potential extraordinary effects...

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