Unigel Participacoes S.A. Assigned Global Scale #B+# And National Scale #brA-# Outlook Stable

Stocks and Financial Services Press Releases Tuesday May 22, 2018 09:43
SAO PAULO--22 May--S&P Global Ratings

SAO PAULO (S&P Global Ratings) May 21, 2018--S&P Global Ratings assigned its long-term 'B+' global scale corporate credit rating and 'brA-' national scale rating to Unigel Participacoes S.A. (Unigel). The outlook is stable.

At the same time, we assigned our 'B+' issue-level rating on Unigel Luxembourg S.A.'s $200 million senior secured notes maturing in 2024, which are fully and unconditionally guaranteed by Unigel and the subsidiary guarantors (Acrilonitrila do Nordeste S.A., Companhia Brasileira de Estireno, Proquigel Química S.A., and Plastigas de Mexico S.A.). The '3' recovery rating on the notes indicates our expectation of meaningful recovery (rounded estimate: 65%) in the event of default.

The ratings are in line with the preliminary ratings we assigned on March 5, 2018 (see "Unigel Participacoes S.A. Assigned Preliminary 'B+' Long-Term Rating; Outlook Stable"). Instead of the expected seven-year $400 million senior unsecured debt, the company issued five-year $200 million secured notes. Other differences from the previous expected scenario are a slightly more expensive all-in cost (including hedging) and inclusion of certain restrictions on dividend payments. Although from a liquidity perspective, this change doesn't affect the final rating, we believe the company's financial flexibility has weakened somewhat compared to the original expected issuance, given that almost all of the company's assets are pledged to the current debt. Please refer to the liquidity section for further details.

Our ratings on Unigel reflect the company's overall limited scale in the commoditized styrenics and acrylics markets, even though its leading position in Latin America partially offsets its small size. Unigel produces methyl methacrylate (MMA) and acrylonitrile in two units in the Bahia state, polystyrene in the Sao Paulo state, and cell cast acrylic sheets in Mexico--generating EBITDA of about R$365 million in 2017. The ratings also incorporate our expectation that Unigel will continue to keep its leverage at more sustainable levels, especially after selling its non-core packaging business in 2016, coupled with reduced liquidity pressures and expected improved cash flow generation through the successful placement of its proposed bonds.

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