Fitch Ratings has assigned Petkim Petrokimya Holdings A.S. (Petkim) a Long-Term Issuer Default Rating (IDR) of 'B' with Stable Outlook. Fitch has also assigned Petkim's proposed notes an expected rating of 'B(EXP)'/'RR4' subject to the receipt of final documentation conforming to the information already received, APA-Economics reported.
The rating reflects Petkim's small scale and high product concentration relative to larger, diversified global peers. Specifically, the company owns a single-site petrochemical complex and is exposed to cyclical commodity polymers, which results in inherent earning volatility. The rating is also constrained by Petkim's forecast elevated leverage under our base case, on the back of the planned debt-funded acquisition of a stake in the STAR refinery. Supports for the rating include a well-invested asset base and a strong position in the growing Turkish chemical market where Petkim is the sole domestic petrochemical producer.
The Stable Outlook reflects our view that beyond the forecast peak in funds from operations (FFO) adjusted net leverage in 2018 of 5.1x, Petkim will maintain a financial profile commensurate with our rating sensitivities despite expected supply-driven margin pressure. Our base case also assumes that the commissioning of the STAR refinery in 2018 will improve Petkim's cost structure and help mitigate headwinds and support positive free cash flow (FCF) generation and gradual deleveraging post-2018.