Moody’s upgrades INEOS on better capacity utilisation in Europe, US

11 February 2014 12:54 Source:ICIS News

LONDON (ICIS)--Rating agency Moody's on Tuesday upgraded INEOS’ credit rating from B2 to B1 on the back of improved capacity utilisation at the Swiss-headquartered producer's North American and European plants and expected better market conditions in 2014.

Moody’s said INEOS’ performance in 2013 had been “resilient” despite disruptions at its Grangemouth site in Scotland, the UK, and added the upgrade reflected expected "higher utilisation at its European operations in 2014, [which] will lead to improving credit metrics, and continued strong liquidity evidenced, in part, by the lack of sizeable near term debt maturities until 2018."

"Moody's expects the North American business will continue to operate at top of the cycle margins and that utilisation in Europe will benefit from the restarting of the cracker at Lavera [France], in January 2014, and the disposal of the UK business, which was suffering from dwindling feedstock supplies," said Douglas Crawford, analyst at Moody’s.

The rating agency said the rating takes advantage of INEOS’ strong liquidity and reinforced capital structure, its position as “one of the world's largest and most diversified chemical groups”, its integrated business model and its “well-invested production facilities”.

However, the agency also warned the high level of INEOS' indebtedness will limit its financial flexibility and ability to incur in additional debt. 

Other warnings come from the volatility raw materials are subject to, weakening European olefin margins and the company’s “shareholder friendly policy” and its complex structure, said Moody's.

In Moody's 21-notch rating scale, B1 is placed on the fourteenth position. Moody's considers notches from AAA to Baa3 (first to tenth notches) 'investment grade', while from Ba1 to C (eleventh to twenty-first notches) are considered 'speculative grade'.

Obligations rated B are therefore considered speculative and are subject to high credit risk, according to the agency's methodology.

By Jonathan Lopez