Lithuania, Markets and Companies, Oil

Orlen traded at 28.46 zloty, a gain of 2.7% on the day as of 1:44 p.m. in Warsaw, down from as much as 29 zloty before Moody's announcement. The company's rating was cut one level to Ba1, one step below investment grade, as falling demand for petrochemicals, lower oil prices and higher debt costs cut PKN cash flow, Moody's said today in a statement.

PKN said last week it posted a net loss in the first quarter, after a profit a year earlier, as the weakening zloty raised the cost of debt. A decline in the value of oil stored in the company’s tanks cut Orlen's earnings by 246 million zloty ($76.6 million) in the three months to April 31.

"Debt and cash-flow metrics will continue to deteriorate in the short term as PKN will face continued challenging market conditions," Moody's said in the report. The rating assessor also placed the company on "negative" outlook, indicating a possible further downgrade.

The zloty has depreciated 22.5% versus the euro in the past 12 months. Oil has dropped 53% in the same period.