S&P rates Sinopec notes AA-

Standard & Poor’s said it assigned an AA- long-term issue rating and cnAAA long-term Greater China regional scale rating to the proposed issues of dollar- and euro-denominated fixed-rate notes for which China Petrochemical Corp. (Sinopec Group) will provide an unconditional and irrevocable guarantee.

Sinopec Group Overseas Development (2015) Ltd., a newly established special purpose entity, will issue the notes.

Sinopec Group intends to use the proceeds to refinance existing debt and for overseas businesses, S&P said.

The ratings reflect the company’s A stand-alone credit profile and an opinion that there is an extremely high likelihood that the government of China will provide timely support to the group in the event of financial distress, the agency said.

The group’s financial performance is still commensurate with the current rating, even though a sharp decline in oil prices weakened its results in 2014 with a ratio of debt-to-EBITDA of 2.5x, compared with an original expectation of about 2.1x in September 2014, S&P said.

The group raised Chinese RMB 105 billion from the partial divestment of its marketing segment in March, which is expected to counterbalance the impact of lower oil prices in 2015, the agency said.

Also, Sinopec’s integrated business model and an expectation of lower oil price volatility in 2015 should stabilize its refinery business, S&P added.

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