The assignment of the final rating follows receipt of documents conforming to the information previously received. The final rating is the same as the expected rating assigned on 26 September 2013.
The bonds benefit from a direct, unconditional, general and irrevocable guarantee from SABIC. The guarantee is a senior unsecured obligation of SABIC and ranks at least pari passu with all its existing and future senior unsecured and unsubordinated obligations.
SABIC Capital II B.V. is an indirect wholly owned subsidiary of SABIC incorporated in the Netherlands as a private limited liability company. The company was set up in 2008 as a finance and investment vehicle of the group. The funds it borrows are on-lent to companies of the SABIC Group in the US and it relies on the financial support of SABIC. SABIC has entered into a guarantee agreement with SABIC Capital II B.V. whereby SABIC has unconditionally and irrevocably undertaken to the issuer, among others, that it will make available to the issuer sufficient funds to meet its payment obligations as and when they become due and payable.
The guarantee is structurally subordinated to the claims of the creditors of SABIC and its subsidiaries. In our view, the risk of structural subordination is strongly mitigated by our expectation that the groups consolidated funds from operations (FFO)-adjusted net leverage will remain below 1.0x over the rating horizon.
Other than a negative pledge (with permitted liens), the bonds have no specific covenants. Events of default include cross default to the debt of the issuer or the guarantor with a $100million threshold. The bonds are also subject to a bondholders’ put option upon the occurrence of a change of control event.