MOODY'S MAY CUT B.P. <BP>, STANDARD OIL <SRD>
Moody's Investors Service Inc said it
may downgrade British Petroleum Co PLC's 3.5 billion dlrs of
debt and Standard Oil Co's 3.8 billion dlrs of debt.
    The agency cited British Petroleum's 7.4 billion dlr tender
offer today for the remaining 45 pct of Standard Oil shares it
does not already own.
    Moody's said that while British Petroleum has greatly
strengthened its capital structure over the past few years,
this acquisition would seriously affect the company's
liquidity, leverage and interest coverage.
    Moody's noted that British Petroleum would use more than
two billion dlrs of excess cash and marketables and about five
billion dlrs of new acquisition debt to fund the transaction.
    In addition, the minority interest and deferred income
taxes attributable to Standard Oil would be excluded from
British Petroleum's capitalization. That would result in a
total debt to capital ratio of nearly 50 pct, Moody's said.
    The rating agency said it would study B.P.'s strategy to
restore financial flexibility after the acquisition. Moody's
said that may include divestiture of various petroleum and
non-petroleum assets and operations of B.P. and Standard.
    But Moody's noted that after the major asset writedown and
divestiture progress achieved by Standard Oil in 1985, fewer
non-petroleum assets are available for sale.
    Under review are the A-1 senior debt of issues guaranteed
by British Petroleum, including Eurobonds of BP Capital B.V.,
debentures of BP North America Finance Corp, Eurodebt of
British Petroleum B.V., BPCA Finance Ltd and BP Canadian
Holdings Ltd, debentures and medium-term notes of BP North
America Inc. Also, the A-1 debt of Standard Oil and Sohio
Pipeline, and debentures of Sohio/BP Trans-Alaska Pipeline
guaranteed severally and not jointly by B.P. and Standard.
 Reuter
