Moody’s cuts Nizhnekamskneftekhim

Moody’s Investors Service said it downgraded the corporate family rating and the probability of default rating of Nizhnekamskneftekhim (NKNK) to B1 and B1-PD from Ba3 and Ba3-PD, respectively. The agency cited expectations of material deterioration in the financial profile and potential strain on liquidity as a result of a covenant breach. Moody’s revised the outlook to stable from under review.

The action concludes a review started on June 26 in the wake of the coronavirus pandemic-related sharp deterioration in the global polyolefins and rubbers markets conditions, Moody’s said.

“Moody’s expects NKNK’s EBITDA to decline by more than 40% in 2020 compared with 2019 and to recover to 70%-85% of 2019 levels by end-2021. At the same time, NKNK will continue to build up its debt levels to fund its investment program. As a result, the company’s leverage measured by debt/EBITDA will rise to 5x or above in 2020-21 according to Moody’s estimates, which is commensurate with a mid-to-low B rating category,” the agency said in a press release.

Also, Moody’s expects NKNK will be in breach of its tightest net debt/ EBITDA covenant, which is embedded in its debt documentation and is set at 3.5x for 2020-22. Failure to obtain waivers from creditors would strain its liquidity as it may constrain project-related disbursements and, in the worst case, trigger acceleration of debt, in part or in full, Moody’s said.

“The agency believes that the company is well positioned to obtain the waiver; however, this may take time during which Moody’s will consider NKNK’s liquidity to be under pressure,” the agency said.

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