S&P assigns Syensqo, bonds BBB+

S&P said it assigned BBB+ ratings to Syensqo SA and the bonds transferred to it from Solvay SA and the subordinated hybrid bonds BBB-. The outlook is stable.

On Friday, Solvay completed the partial demerger, upon which its specialty business was transferred to Syensqo (formerly Specialty Holdco Belgium).

“The rating reflects the low initial leverage at spinoff date. We expect our adjusted FFO to debt to exceed 40% for 2023 on a pro-forma stand-alone basis, followed by a progressive improvement to comfortably above 55% in 2024-2025. This indicates ample headroom, given our expectation of at least 35% FFO to debt for the current rating. It reflects Syensqo's solid balance sheet at the outset of the separation. Our total adjusted net debt amounts to about €2.2 billion at the end of 2023 following the spinoff, and will improve in 2024-2025 due to higher earnings and solid free cash flow generation,” S&P said in a press release.

However, the agency noted, “Major risks in Syensqo's business include exposure to some volatile end markets, such as auto, aerospace, oil and gas, and construction. Syensqo has relatively high exposure to the volatile auto and aerospace sector (nearly 30% of total sales in 2022). In addition, the oil and gas activities (about 7% of 2022 sales) have historically been more volatile than other segments.”

S&P said it forecasts Syensqo’s adjusted FFO to debt will improve and remain well above 35% in the next 24 months, which it considers commensurate with the BBB+ rating.

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