Moody's may up Holly, Frontier

Moody's Investors Service said it placed under review for possible upgrade the ratings of Holly Corp. and Frontier Oil Corp. in response to the announcement by the two companies of their agreement to merge in a stock-for stock transaction.

Holly has a Ba3 corporate family rating, Ba3 probability of default rating and B1 senior bond rating. Frontier has a Ba2 corporate family rating, Ba2 probability of default rating and Ba3 senior bond rating, Moody's said.

The review for possible upgrade reflects the benefits to both Holly and Frontier of the merger, including a significant increase in refining capacity, enhanced operational diversification and the potential for modest corporate and operating synergies, Moody's said.

The review also reflects the conservative pro-forma leverage of the combined entity due to the equity financing of the transaction and relatively low leverage positions of both Holly and Frontier, the agency said.

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