Moody’s gives Gemini HDPE loan Ba2

Moody's Investors Service said it assigned a Ba2 rating to Gemini HDPE LLC's senior secured credit facilities consisting of a $420 million seven-year senior secured construction/term loan B due July 2021.

The outlook is stable.

Moody’s said the Ba2 rating mainly reflects the Completion Agreements and Tolling Guarantees from each of Ineos Group Holdings SA (B1, stable) and Sasol Financing (Pty.) Ltd., a subsidiary of Sasol Ltd. (Baa1, stable), balanced against the high susceptibility of the project's standalone merchant economics to high-density polyethylene (HDPE) margin volatility.

While the guarantee from a subsidiary of Sasol, an investment-grade rated credit, considerably mitigates the project risk, the several-but-not-joint nature of the guarantees and Ineos’ B1 rating limit the extent to which the risk is mitigated, the agency said. Moreover, while the joint venture will be equally owned, Ineos’ role in the project is substantial both from an operational and technology perspective.

Moody’s also observes that the Gemini project is 50% larger than the largest existing plant using Innovene-S technology and as such, uncertainty exists with regards to Sasol's willingness and/or capability to operate the Innovene-S technology in the event of an Ineos’ default.

That said, the agency recognizes the strength of the Tolling Agreement and the Guarantees, which together provide significant cash flow predictability.

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