Baku, Azerbaijan, Jan.30
By Leman Zeynalova – Trend:
Fitch Ratings has assigned Petkim Petrokimya Holdings A.S.'s (Petkim) senior unsecured 500 million 5.875 percent bond due 2023 a final foreign-currency senior unsecured rating of 'B'/'RR4', said a message from Fitch.
The rating is aligned with Petkim's Issuer Default Rating (IDR) which reflects the company's small scale and high product concentration relative to larger, diversified global peers.
“Specifically, Petkim owns a single-site petrochemical complex and is exposed to cyclical commodity polymers, which results in inherent earnings volatility. The IDR is also constrained by Petkim's forecast high leverage under our base case, on the back of the planned debt-funded acquisition of a stake in the STAR refinery. Supports for the rating include a well-invested asset base and a strong position in the growing Turkish chemical market where Petkim is the sole domestic petrochemical producer,” said the report from Fitch.
The Stable Outlook on Petkim's Issuer Default Rating (IDR) reflects Fitch’s view that beyond the forecast peak in funds from operations (FFO) adjusted net leverage in 2018 of 5.1x, Petkim will maintain a financial profile commensurate with our rating sensitivities despite expected supply-driven margin pressure.
“Our base case also assumes that the commissioning of the STAR refinery in 2018 will improve Petkim's cost structure and help mitigate headwinds, and support positive free cash flow (FCF) generation and gradual deleveraging after 2018,” said the rating agency.
Further, the report says that demand for petrochemicals products in Turkey is expected to grow at a compound annual rate of 7 percent between 2016 and 2023.
“Petkim plans to add capacity in its speciality chemical products division, with expansions coming onstream in 2018 and 2019. Petkim expects to save $70 million annually on logistic costs after the refinery is commissioned. We view the improved cost structure as positive for the credit profile. Additional synergies with the refinery in infrastructure and services may also provide further upside to Petkim's cost structure and earnings,” according to Fitch.
Petkim petrochemical complex has placed Eurobonds worth $500 million on the Irish Stock Exchange on Jan.26, 2018.
The profitability of bonds with a circulation period of five years will be 5.875 percent. The bonds will be put up for sale at a price of 99.467 percent of the face value.
Interest payments will be made twice a year - on July 26 and on Jan. 26 until the end of the circulation period.
Goldman Sachs International, J.P. Morgan Securities Plc., Citigroup Global Markets Ltd., Societe Generale and VTB Capital Plc. have been empowered to issue the Eurobonds.
Petkim intends to channel the funds from the placement of Eurobonds for the acquisition of a 30-percent stake of SOCAR Turkey Energy in Rafineri Holding, which owns a controlling stake in the STAR refinery.
The deal will allow Petkim to also acquire an 18-percent equity stake in the STAR refinery.
Petkim produces plastic packages, fabrics, detergents, and is the sole Turkish manufacturer of such products, a quarter of which is exported. The production capacity of Petkim is 3.6 million tons per year.
Petkim shareholders are SOCAR Turkey Petrokimya AS (51 percent), Goldman Sachs (7.68 percent), and other shareholders (41.32 percent).
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