Brazilian petrochemicals company Braskem SA has been upgraded to investment grade at BBB- on the back of strong profitability and debt reductions. S&P raised both the issuer credit rating and unsecured issue-level rating on Braskem to BBB- from BB+, and also raised the company’s subordinated notes to BB from B+, with an overall stable outlook on the issuer. The rating agency cited high petrochemical spreads over the next few quarters, which should lead to stronger EBITDA and cash flows until 2022 as reasons for the upgrade. S&P is penciling in an EBITDA (excluding Braskem Idesa) of $4.7bn in 2021, $3.0-3.5bn in 2022 and ~$2bn in 2023. It added, “The company has been using its cash flows to prepay debt, signaling its commitment to low leverage levels in line with an investment-grade rating. Until July 2021, the company reduced gross debt by about $1.7bn. We believe Braskem will post debt to EBITDA of about 1x at the end of 2021, similar to the level in the first half of this year, even assuming some dividend distribution before the year-end. This metric is much stronger than 3.6x in 2020 and 5.3x in 2019, and more in line the level close to 2.0x in 2015-2018.”
Braskem’s 6.45% bonds due 2024 traded stable at 112, yielding 1.36%.
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