BUSINESS

Moody’s assigns A1 ratings to SABIC’s proposed notes; outlook stable

September 25, 2018
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LONDON —

Moody’s Investors Service (“Moody’s”) has assigned an A1 instrument rating to the proposed new senior unsecured notes that will be issued by SABIC Capital II B.V. and unconditionally and irrevocably guaranteed by Saudi Basic Industries Corporation (SABIC). Concurrently, Moody’s has affirmed SABIC’s A1 long-term issuer rating and A1 senior unsecured ratings of SABIC Capital I B.V. and SABIC Capital II B.V. The outlook on all ratings is stable.

“SABIC’s A1 rating reflects its strong business position in the chemical sector and its ability to weather industry volatility, particularly given its healthy operational cash flows and conservative liquidity profile,” said Rehan Akbar, a Moody’s Vice President -- Senior Analyst.

SABIC’s A1 issuer rating reflects its strong global position in the petrochemical and fertilizer markets that it has built up over the past four decades, as well as its competitive cost position, underpinned by significant economies of scale and access to competitively priced feedstock. These advantages help mitigate the volatility of its predominantly commodity-based petrochemical, fertilizer and steel activities, and significant fluctuations in supply and demand that affect its markets through industry and economic cycles. The rating also incorporates the high concentration of production assets in Saudi Arabia (A1 stable), where SABIC benefits from advantaged feedstock pricing.

SABIC’s credit metrics are well-positioned within Moody’s rating guidance for its A1 rating. For the last twelve months (LTM) as at 30 June 2018, Moody’s adjusted debt/EBITDA stood at 1.3x while adjusted net debt/EBITDA was 0.1x. As of 30 June 2018, total unadjusted debt of SR64.7 billion was offset by balance sheet cash of SR65.7 billion.

Total short-term debt of SR27.6 billion is well above historical average and results from a SR11.3 billion one-year bridge loan taken in January 2018 to fund the 24.99% stake acquisition in Clariant AG (Ba1 stable) as well as the $1 billion (SAR3.75 billion) bond due 3 October 2018. The cash proceeds from the new issuance will primarily be used to refinance existing debt.

SABIC’s baseline credit assessment (BCA), a measure of standalone credit quality, is a1 and is at the same level as its long-term issuer rating. — SG


September 25, 2018
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