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Investing.com -- S&P Global Ratings has placed its ’BBB’ long-term issuer credit rating and ’BBB’ issue rating on PTT Global Chemical Public Co. Ltd.’s U.S. dollar-denominated senior unsecured notes on CreditWatch with negative implications on March 25, 2025. This is due to the company’s weaker-than-expected earnings outlook amid a prolonged downcycle in the petrochemical industry.
The credit rating agency revised downward its assessment of PTT Global Chemical’s stand-alone credit profile (SACP) to ’bb-’ from ’bb’. This decision reflects the company’s slower deleveraging driven by its softer earnings outlook. The agency forecasts the company’s ratio of adjusted debt to EBITDA will remain above 5.0x over 2025 and 2026, up from 8.1x in 2024. This is contrary to its previous expectation for the company to deleverage to below 5.0x in 2025.
The petrochemical industry is expected to remain oversupplied, despite capacity rationalization at current spreads. Additionally, escalating trade tensions could soften the global demand for manufacturing goods, further underpinning the view that there are limited signs of a meaningful recovery from the cyclical trough in the petrochemical industry.
Despite these challenges, PTT Global Chemical is expected to continue reducing its adjusted debt by curtailing non-essential capital expenditures and minimizing shareholder returns. The company’s adjusted debt is forecasted to decline to approximately THB210 billion in 2025 and to about THB200 billion in 2026, down from THB237 billion in 2024.
However, the lack of meaningful group support during times of credit weakness raises doubts about the extent of support. This indicates PTT’s willingness to allow its petrochemical flagship subsidiary to operate with a higher risk appetite than previously envisaged. The company’s ratio of adjusted debt to EBITDA has been well above 6x since 2022, whereas this ratio averaged about 2.3x in 2012-2021. This contrasts with PTT’s stated financial policy tolerance of a 2.0x net debt-to-EBITDA ratio.
The CreditWatch placement with negative implications reflects the possibility of a downgrade by one notch if the assessment of PTT Global Chemical’s group status within the PTT group is lowered. This could materialize as part of the internal review of the group dynamics, in conjunction with the view of Thai Oil’s group status, which is expected to conclude during the first half of 2025. The resolution of the CreditWatch will consider the extent of support from PTT and the resultant impact on PTT Global Chemical’s financial standing.
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