Standard & Poor's Ratings Services today said it has assigned its 'A+' long-term rating to the proposed bond issue by SABIC Capital I B.V. (not rated), to be unconditionally guaranteed by its parent company, Saudi Arabia-based petrochemicals producer, Saudi Basic Industries Corp. (SABIC; A+/Stable/A-1).
"We understand that SABIC Capital will use the proposed bond's proceeds to repay certain debt to third parties, which was incurred to extend loans to other SABIC Group companies. We note for instance that SABIC Capital hasrefinanced the $1 billion revolving bank credit facility of SABIC Innovative Plastics Holding B.V. (BBB-/Stable/--) through an intercompany facility," Standard & Poor's said in a statement.
The ratings on Saudi Arabia-based petrochemicals producer Saudi Basic Industries Corp. (SABIC) reflect primarily its stand-alone credit profile (SACP), which Standard & Poor's Ratings Services assesses at 'a'. The Kingdomof Saudi Arabia (AA-/Stable/A-1+) owns 70% of SABIC, which we consequently consider to be a government-related entity (GRE) under our criteria. We qualify SABIC's link with the government as "very strong" and its role for thecountry as "important." The ratings factor in one notch uplift for potential extraordinary state support in case of distress.
"Our view of SABIC's "strong" business risk profile is supported primarily by the company's excellent profitability, which stems from its access to competitively priced feedstocks. SABIC is the world's No. 2 producer of ethylene and the No. 3 producer of polyethylene. SABIC's "modest" financial risk profile is underpinned by the company's modest debt and projected large free cash flow generation, according to our calculations, once capital spending falls off from 2011 onward," it added.