S&P downgrades Sasol

S&P said it lowered its long- and short-term foreign currency corporate credit ratings on Sasol Ltd. to BBB-/A-3 from BBB/A-2.

The outlook is stable.

The agency also downgraded its issue-level rating on the senior unsecured notes maturing in 2022, which were issued by Sasol Financing International Ltd. and are unconditionally guaranteed by Sasol, to BBB- from BBB.

S&P said the downgrade reflects a combination of increasing risks in South Africa and the expectation that credit metrics will remain subdued for 2017-2019. The agency now factors in a South African rand to U.S. dollar average exchange rate of 13.5 in 2017 and 14.3 in 2018 compared to the previous expectations of 15.6 and 16.0, respectively.

“We believe that together with the previously reported US$2.1 billion cost overrun at the Lake Charles cracker project and our oil price assumptions of $50/bbl in 2017-2018 and $55/bbl in 2019, Sasol's ratio of funds from operations (FFO) to debt will remain about 45% over the next three years,” S&P said in a news release.

“This is below the 60% we believe is commensurate with a modest financial risk profile and a BBB rating.

“We now don't expect recovery to 60% before 2020. This is despite Sasol's sound progress in efficiency and capital-preservation initiatives.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.