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Rating Action:

Moody's upgrades INEOS Group to Ba2; stable outlook

29 Oct 2021

London, 29 October 2021 -- Moody's Investors Service ("Moody's") today upgraded the corporate family rating (CFR) of Ineos Group Holdings S.A. (INEOS) to Ba2 from Ba3 and probability of default rating (PDR) to Ba2-PD from Ba3-PD. Concurrently, Moody's affirmed the Ba2 ratings of guaranteed senior secured notes due November 2025, March 2026 and May 2026, also affirmed the Ba2 ratings of guaranteed senior secured term loans due March 2024 and October 2027 issued by Ineos Finance plc and the guaranteed senior secured term loan due March 2024 issued by Ineos US Finance LLC. Further, Moody's assigned Ba2 ratings to the proposed guaranteed senior secured term loan add-on to be issued by Ineos Finance plc and Ineos US Finance LLC. The rating outlook on all three entities was changed to stable from positive.

RATINGS RATIONALE

Today's rating action reflects INEOS' continuing robust performance across its portfolio in the first nine months of 2021 leading to very strong credit metrics. The company posted record revenues and EBITDA in the third quarter of 2021, for the second quarter in a row. On a last twelve months basis, INEOS' revenues increased by 64% for the twelve months ended 30 September 2021 as compared to the same period in the prior year and EBITDA more than doubled. Also positively, INEOS' leverage reduced to approximately 2.9x for the twelve months ended 30 September 2021 from 5.1x for the twelve months ended 30 September 2020. These positives are counterbalanced by the volatile nature of the commodity chemicals industry and INEOS' history of large shareholder distributions.

Also positively, INEOS Group has met Moody's criteria for a positive rating movement: retained cash flow to debt at 22% for the twelve months ending 30 June 2021 and expected to remain above 20% in the next 12-18 months and Moody's-adjusted total debt to EBITDA expected to be at around 3.0x over the same time frame.

The Ba2 corporate family rating of INEOS reflects (1) its robust business profile including its leading market position as one of the world's largest chemical groups across a number of key commodity chemicals; (2) vertically integrated business model, which helps the group capture margins across the whole value chain and economies of scale advantages, (3) well-invested production facilities, most of them ranking in the first or second quartile of their respective regional industry cost curve; and (4) improved credit profile on the back of market recovery. These positives are counterbalanced by (1) the cyclical nature of the commodity chemical industry; (2) broad-based increases in raw material, transportation and energy costs in recent months; (3) history of large shareholder distributions.

ESG CONSIDERATIONS

The chemical industry is among the eleven sectors identified by Moody's as having an elevated credit exposure to environmental risk. Soil water and air pollution regulations continue to represent the key environmental risk to the chemical sector, with petrochemical companies such as INEOS particularly exposed to carbon emission regulations. As such, INEOS's rating takes into consideration the increasing environmental regulations for the chemicals business in Europe and the US, which are partly mitigated by the group's good safety, health and environment (SHE) track record.

INEOS is a private company that is part of the INEOS family of companies ultimately 100% owned by James Ratcliffe (61.8%), Andrew Currie (19.2%) and John Reece (19.0%), 95% of which is held through INEOS Limited. INEOS's stated financial policy is to keep unadjusted net leverage under 3.0x through the cycle.

LIQUIDITY

At 30 September 2021, INEOS had €2,195 million of cash and over €780 million available on its working capital facility which matures on 31 December 2022. The company does not have other bank facilities such as an RCF in place; however, the business is expected to be cash generative in the next 12-24 months. INEOS further indicated on its third quarter earnings call that it expected to make an approximately €700 million dividend distribution over the fourth quarter of 2021 and the first quarter of 2022.

STRUCTURAL CONSIDERATIONS

Pro forma for the proposed transaction, all of INEOS' debt will be secured and will consist of a term loan and senior secured notes which are rated at Ba2, in line with the CFR.

RATING OUTLOOK

The stable rating outlook reflects Moody's expectation that INEOS will balance the interests of its shareholders and debtholders prudently and maintain leverage not exceeding 4.0x calculated as gross debt/EBITDA including Moody's standard adjustments.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Further positive pressure on the rating may arise if (i) retained cash flow to debt is consistently above 25%; (ii) Moody's-adjusted total debt to EBITDA is sustained below 3x; and (iii) INEOS maintains good liquidity. Furthermore, a moderate approach to shareholder distributions would be important for an upgrade.

Conversely, the ratings could come under downward pressure if (i) Moody's-adjusted total debt to EBITDA is over 4x and retained cash flow to debt is below 20% for a prolonged period of time; (ii) the group's liquidity profile weakens; or (iv) INEOS chooses to make material dividend distributions such that its leverage levels become elevated.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Chemical Industry published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1152388. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Incorporated in Luxembourg, INEOS is one of the world's largest chemical companies in terms of revenue and a large global manufacturer of petrochemical products, mainly olefins and polyolefins. In 2020, INEOS reported EBITDA before exceptional items of €1,535 million on revenue of €11.3 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Maria Maslovsky
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Mario Santangelo
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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