Moody’s cuts LyondellBasell

Moody’s Investors Service said it downgraded the senior unsecured ratings of LyondellBasell Industries NV and its subsidiaries to Baa2 from Baa1.

The agency downgraded LyondellBasell after the announcement that one of Lyondell’s U.S. subsidiaries agreed with Sasol Chemicals (USA) LLC, a subsidiary of Sasol Ltd., to create a 50/50 joint venture company that would own and operate Sasol’s ethylene and polyethylene assets in Lake Charles, La. For its 50% share, Lyondell will pay Sasol $2 billion and manage production at the site.

“Despite a very attractive valuation that is meaningfully below replacement cost, Lyondell’s credit metrics are expected to be very weak for the prior Baa1 rating through 2022,” said John Rogers, a Moody’s senior vice president and lead analyst for LyondellBasell, in a press release.

“Additionally, given global capacity additions and weak oil prices over the next year or two, we expect that Lyondell will have difficulty generating meaningful free cash flow and reducing debt, despite the three months of U.S. polyethylene price increases in the third quarter of 2020,” Rogers said.

Lyondell’s outlook is stable.

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