S&P rates SQM notes BBB+

S&P said it assigned its BBB+ issue-level rating on Sociedad Quimica y Minera de Chile SA’s senior unsecured notes for up to $500 million. It will use the proceeds to finance part of its lithium and potassium nitrate expansions, for debt refinancing, including the payment of its $250 million 2020 notes and for general purposes.

The rating on the notes is the same as the issuer credit rating on the company because S&P doesn’t believe there’s significant structural subordination, given that the company doesn’t hold any secured debt and subsidiaries hold less than 1% of consolidated debt.

“Our BBB+ rating on SQM reflects its efficient cost structure, thanks to its strategic location in the Atacama Desert that grants access to high-quality and abundant natural reserves,” said S&P in a press release.

“The rating also reflects the company’s low leverage underpinned by a conservative financial policy. We expect leverage to peak between 2020 and 2021 amid lithium expansion plans in a low lithium price scenario. We expect net debt to EBITDA to be 1.4x-1.6x in 2020 and 2021, up from an estimated 1.2x in 2019,” the agency said.

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