Moody's assigns Baa2 rating to Thailand's PTT Global Chemical

20 October 2011 12:26  [Source: ICIS news]

SINGAPORE (ICIS)--Moody’s Investors Service said on Thursday it has assigned a Baa2 credit rating, with a stable outlook, for PTT Global Chemical, the new flagship petrochemical company of Thailand’s oil and gas firm PTT.

The new rating for PTT Global Chemical, formed by the merger of PTT affiliates PTT Chemical (PTTCH) and PTT Aromatics & Refining (PTTAR), will affect about $600m worth of debt securities, Moody’s said in a statement.

“The Baa2 rating captures the entity’s standalone rating of Baa3, plus one notch of uplift based on Moody’s assessment of the credit support that its parent, PTT, is likely to provide in the event of distress,” the ratings firm said.

Moody’s has a Baa1 rating on PTT, with a stable outlook. PTT is the single biggest shareholder of PTT Global Chemical, with a 48.92% interest, it said.

The rating action on the merged company, PTT Global Chemical, “concludes the review for possible upgrade for PTT Chemical’s Baa3 rating initiated on 25 February 2011”, the credit ratings firm said.

“The rating outlook is stable, reflecting Moody’s expectation that PTT Global Chemical will maintain its leading position in Thailand’s petrochemical sector and its solid financial profile,” Moody’s said.

The Thai petrochemical giant may be upgraded if it successfully expands its downstream petrochemical product range and enhances its profitability, it said.

PTT Global Chemical will start trading on the Stock Exchange of Thailand (SET) on Friday, replacing the shares of PTTCH and PTTAR on the bourse.

Moody’s said it has withdrawn its Baa2 rating for PTTAR and its Baa3 rating on PTTCH, following completion of their amalgamation on 19 October.

“The new entity’s financial profile benefits from relatively low leverage, moderate capex [capital expenditure] plans and positive free cash flow generation,” said Simon Wong, vice president and senior analyst at Moody’s.

Wong said the Baa2 rating assigned to PTT Global Chemical takes into account the cyclicality of the refining and petrochemical industry.

“However, the related but distinct upstream refining and downstream petrochemical industry cycles would reduce the volatility in both the earnings and cash flow that PTT Aromatics & Refining and PTT Chemical were subject to on a standalone basis,” said Wong.

By: Pearl Bantillo
+65 6780 4359

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