The downgrade reflects the continued insecurity because of the disagreement between MOL and the Croatian government on strategic issues in INA, in which MOL has a 49 per cent stake and management control, the agency said, adding that INA accounts for about 37% of MOL's reserves and output and that it has two refineries.
The lack of a solution in the negotiations with the Croatian government negatively affects MOL's credit rating, the agency said, also downgrading MOL's bonds by one degree.
MOL responded to the downgrade with a statement on the Budapest Stock Exchange, saying that while management was examining all possible options, its primary goal was to reach an agreement with the Croatian government to increase investments in INA.
MOL's credit rating is now identical to Hungary's but Standard & Poor's believes MOL could retain sufficient liquidity to cover its liabilities even in case of extreme pressure on the state.
MOL's international business would insure the group from potential weakness in its domestic operations, the agency said, but added that a downgrade on Hungary by more than two degrees would likely lead to a downgrade on MOL.
Standard & Poor's said, however, that MOL's rating could be upgraded in certain circumstances, for example if MOL sold its stake in INA and invested the money in new production assets in areas with a lower state risk than Hungary.
If MOL retains its stake in INA but continues to diversify its assets to improve its competitiveness, its rating might be upgraded in the medium term, the agency said.