Moody's assigns stable rating to Sabic bond issue
London, May 17, 2010
Moody's Investors Service has assigned a (P) A1 senior unsecured rating to the proposed issue of senior unsecured bonds by Sabic Capital. The outlook for the rating is stable.
Sabic Capital is an indirect wholly-owned subsidiary of Saudi Basic Industries Corporation (Sabic). The bonds will be unconditionally and irrevocably guaranteed by Sabic.
Proceeds raised from the proposed bond issuance will be used for the refinancing of existing group debt in line with Sabic's corporate strategy to gradually centralise the funding of the group at the parent level and further reduce the complexity of the group's debt structure.
Sabic's A1 rating reflects the group's strong global positions in the petrochemicals and fertiliser markets as well as its highly competitive cost position underpinned by substantial scale benefits and access to significantly cost-advantaged feedstock sourced from 100 per cent government-owned Saudi Aramco, which help mitigate its exposure to predominantly commodity-like cyclical activities.
The rating also takes into account the weakening in Sabic's financial profile and credit metrics relative to historical levels that has resulted from the severe cyclical downturn experienced by the global chemical industry in late 2008/early 2009. However, future earnings and cash generation is expected to benefit from the continuing recovery in market conditions that has gained momentum since the low of early 2009.
In addition, the completion of major projects including Yansab, Sharq and Saudi Kayan should enhance Sabic's ability to capitalise on secular trends in global chemical consumption. This together with a continuing access to competitively priced feedstock and long-term funding from government-related agencies for part of the financing of its projects, should help underpin Sabic's financial flexibility and overall credit profile, Moody's said.
Moody's previous rating action on Sabic was the affirmation of its A1 senior unsecured rating and revision of the outlook to stable from positive following the upgrade of Saudi Arabia's sovereign ratings to Aa3 / stable outlook on February 15.
Headquartered in Riyadh, Sabic is a diversified industrial conglomerate that is 70 per cent-owned by Saudi Arabia and principally active in petrochemicals, fertilisers and metals.-TradeArabia News Service