Moody’s assigns A1 rating to SABIC’s proposed notes

Moody's Investors Service assigned an A1 instrument rating to the proposed new senior unsecured notes that will be issued by SABIC Capital II BV, it said in a statement on Monday.

It also affirmed SABIC's A1 long-term issuer rating and A1 senior unsecured ratings of SABIC Capital I BV and SABIC Capital II BV, adding that the outlook on all ratings remain 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, vice president - senior analyst, Moody's.

According to the report, SABIC's A1 issuer rating reflects 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, Moody's added.

Meanwhile, the report noted that the stable outlook indicates SABIC's strong free cash flow profile and its ability to accommodate its long-term growth strategy, bolt-on acquisitions, and high cash distributions, while maintaining strong credit metrics through the cycle.

The Public Investment Fund (PIF), the Kingdom's sovereign wealth fund, owns 70 percent of SABIC, which reported consolidated revenues of SAR163.5 billion as of the last 12 months ending  June 30, 2018.

On Monday, Reuters reported that the world’s fourth-largest petrochemicals company has mandated BNP Paribas and Citi as global coordinators for the planned debt issue, along with HSBC, MUFG and Standard Chartered as joint lead managers.