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23 Sep 2010
Approximately USD 350 million in debt securities affected
Sao Paulo, September 23, 2010 -- Moody's Investors Service has assigned a Ba1 foreign currency rating to
the senior unsecured perpetual notes in the amount of approximately USD
350 million to be issued by Braskem Finance Ltd. (Cayman Islands)
and guaranteed by Braskem S.A. ("Braskem"). The proposed
notes issuance is part of Braskem's liability management to improve its
debt maturity profile, and will not affect its leverage metrics
as the proceeds will be used to redeem Braskem's existing perpetual
notes of the same amount, at the first possible call date.
The rating outlook is stable.
Rating assigned is as follows:
Issuer: Braskem Finance Ltd. (Cayman Islands)
Approximately USD 350 million senior unsecured perpetual notes guaranteed
by Braskem S.A.: Ba1 foreign currency rating
Issuer: Braskem S.A.
- Corporate Family Rating: Ba1 (global scale); Aa2.br
(Brazilian national scale)
Issuer: Braskem Finance Ltd. (Cayman Islands)
- USD 500 million senior unsecured notes due 2018 guaranteed by
Braskem S.A.: Ba1 foreign currency rating
- USD 750 million senior unsecured notes due 2020 guaranteed by
Braskem S.A.: Ba1 foreign currency rating
The outlook for all ratings is stable.
The rating of the proposed notes and the stable outlook assume that the
final transaction documents will not be materially different from draft
legal documentation reviewed by Moody's to date and assume that these
agreements are legally valid, binding and enforceable.
Braskem's Ba1 corporate family rating is supported by its large size as
the largest petrochemical company in Brazil and in the Americas by production
capacity, with above industry average operating margins that result
from historically high capacity utilization rates, long-term
client relationships, product customization and logistics-related
barriers for thermoplastic resin imports. The rating also factors
in the company's high exposure to volatile naphtha prices, its moderate
geographic diversification compared to international peers, and
the event risk associated with the company's internationalization process,
which includes potential investments in greenfield projects in neighboring
countries. The recent acquisitions of Quattor Participações
S.A. ("Quattor") and Sunoco Chemical's assets in the U.S.
have helped to improve the operational diversity of Braskem by adding
three relevant site locations. Finally, Braskem's above-average
level of disclosure, its overall good governance practices and the
relevant interest of Petrobras in the company are regarded as credit positives.
The Ba1 rating of the notes at the same level as Braskem's Ba1 (outlook
stable) corporate family rating anticipates the decline in the near term
of the level of secured debt and debt with claim priority towards about
20% of Braskem's total consolidated debt pro-forma for Quattor
and Sunoco Chemicals' polypropylene assets in the U.S.
The stable outlook reflects Moody's expectation that Braskem will maintain
its leading position in the Brazilian thermoplastic resins market,
improve its consolidated margins, and prudently manage its liquidity
position (maintaining a minimum cash position of BRL 3 billion) and capital
structure, which would include reducing leverage in terms of Total
Adjusted Net Debt to EBITDA to about 3.0x in the near term as Quattor
is integrated. Also, the stable outlook assumes that the
greenfield projects will be structured in a way to ring-fence Braskem
from any obligations other than the anticipated equity contribution.
Given Braskem's high leverage for its rating category we do not anticipate
upward pressure on the company's rating or outlook over the near term.
Nevertheless, the rating or outlook could be upgraded if leverage
decreases to a level which Moody's considers to be more compatible with
the volatile nature of Braskem's cash flows, with Total Adjusted
Net Debt to EBITDA expected to stabilize at around 2.5x even during
years when there is margin pressure. An upgrade would also require
that Braskem maintain strong liquidity and EBITDA margins above 15%
during a down cycle in the global industry.
Negative pressure on the rating or outlook could result from weaker liquidity
management or from persistently high leverage, with Retained Cash
Flow (defined as Funds from Operations less Dividends) to Total Adjusted
Net Debt materially below 20% and Total Adjusted Net Debt to EBITDA
above 3.0x. Furthermore, the rating or outlook could
be negatively affected if Braskem assumes higher risks in greenfield projects
than anticipated. The foreign currency rating of Braskem Finance
Ltd's guaranteed notes could be under negative pressure if Braskem's level
of consolidated secured debt does not decline as anticipated over the
near term or in case Braskem provides guarantees to Quattor's debt.
Moody's last rating action on Braskem occurred on July 21, 2010
when we assigned a Ba1 foreign currency rating to the USD 350 million
senior unsecured notes due 2020 issued by Braskem Finance Ltd.
(Cayman Islands) and guaranteed by Braskem S.A. as a reopening
of its USD 400 million issuance concluded in May 2010.
The principal methodology used in rating Braskem was Moody's Global Chemical
Industry rating methodology (December 2009), which can be found
at www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Pro-forma for the acquisition of Quattor and Sunoco's polypropylene
assets in U.S., Braskem is the largest petrochemical
company in the Americas, with annual production capacity of some
6.5 million tons of thermoplastic resins besides aromatics and
automotive gasoline. Consolidated net revenues in 2009 pro-forma
for Quattor and Sunoco Chemical polypropylene assets amounted to USD 11
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's America Latina Ltda.
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's America Latina Ltda.
Moody's assigns Ba1 ratings to Braskem's proposed perpetual notes
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