Moodys withdraws SABICs BCA; affirms A1 rating

Riyadh – Moody's Investors Service affirmed an "A1" ratings for Saudi Basic Industries Corporation’s (SABIC) long-term issuer rating and senior unsecured bond ratings following the completion of the Saudi Arabian Oil Company's (Saudi Aramco, A1 negative) acquisition of a 70% stake in SABIC.

The outlook on the ratings remains negative, according to a recent press release.

Moody's has withdrawn SABIC's a1 baseline credit assessment (BCA) as it is no longer classifies SABIC as a Government-Related Issuer (GRI).

The SABIC's A1 ratings capture its strong global position in the petrochemical market and its competitive cost position, which somehow help mitigate the volatility of its predominantly commodity-based petrochemical, fertilisers, and steel activities. The company, moreover, has a strong balance sheet and maintains substantial excess cash.

Now, the company faces the prevailing challenging market environment, driven by an oversupply of certain petrochemical products, low oil prices, along with weak demand dynamics following the COVID-19 outbreak.

“This will have a negative impact on SABIC's credit metrics in 2020 and 2021. However, SABIC's strong liquidity and broad diversification into multiple products support its credit profile,” the rating agency said.

SABIC's rating is constrained by the rating of Saudi Arabia (A1, negative) and therefore the negative outlook mirrors the negative outlook on the sovereign rating.