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S&P: Poland-Headquartered Soda Ash Producer Ciech Assigned 'B' Rating; Outlook Stable

December 18, 2012
Poland-headquartered Ciech S.A. is a leading player in the Central and
Eastern European soda ash industry.
Ciech has recently issued €245 million senior secured notes and Polish
zloty (PLN) 320 million domestic notes.
We are assigning our 'B' long-term corporate credit rating to Ciech and
our 'B' issue rating to the €245 million senior secured notes issued by
Ciech Group Financing AB.
The stable outlook reflects our view that Ciech's liquidity will remain
"adequate," and that its soda ash business will remain resilient to the
currently volatile economic climate.
LONDON (Standard & Poor's) Dec. 18, 2012--Standard & Poor's Ratings Services
said today that it assigned its 'B' long-term corporate credit rating to
Poland-headquartered soda ash producer Ciech S.A. The outlook is stable.

At the same time, we assigned our 'B' issue rating to the €245 million senior
secured notes issued by Ciech Group Financing AB. We are not rating the
company's Polish zloty (PLN) 320 million domestic notes and PLN100 million
revolving credit facility (RCF) due 2015.

The final capital structure is broadly in line with the preliminary capital
structure, with only minor changes. Notably, the euro-denominated senior
secured notes increased by €20 million to €245 million and the
zloty-denominated senior secured notes decreased by PLN62.3 million to PLN320
million. Overall, Ciech's gross debt increased by about €5.4 million (PLN23
million), which we consider to be a negligible change from the preliminary
structure. There are no changes to either the covenants stipulated in the RCF
documentation, or to the security and guarantee package in the bond

The ratings on Ciech continue to reflect our assessment of Ciech's business
risk profile as "weak" and its financial risk profile as "aggressive," in line
with our preliminary assessments.

Our corporate credit rating on Ciech reflects its stand-alone credit profile
of 'b', without any uplift for extraordinary support from the government of
the Republic of Poland (foreign currency A-/Stable/A-2, local currency
A/Stable/A-1). Although the Polish government owns 39% of Ciech, we view the
likelihood of it providing timely and sufficient extraordinary support to
Ciech in the event of financial distress as "low," as per our criteria on
government-related entities. We base our view of a "low" likelihood of support
on our assessment of Ciech's:

"Limited" role for the Polish government, reflecting our view of Ciech's
operations as non-strategic. Our view is underpinned by the privatization
plan that the Polish Ministry of Treasury published in March 2012, in
which Ciech was not included in the state's portfolio of strategic
"Limited" link with the government because we understand that the
government may dispose of its stake in Ciech in the near term. In
addition, there is a lack of a formal mechanism for the government to
provide timely extraordinary support to Ciech. That said, the Polish
government participated in Ciech's 2011 capital increase.
In our view, Ciech's liquidity will remain "adequate" and its soda ash
business will continue to perform satisfactorily in 2013, notwithstanding the
currently difficult economic climate in Europe. We view an adjusted ratio of
debt to EBITDA of up to 5x as commensurate with the current rating.

Ratings upside could arise in 2013 if Ciech maintains satisfactory profits in
the soda ash business and achieves adjusted debt to EBITDA of less than 4x on
a sustainable basis. Notably, an upgrade depends on Ciech effectively
executing its strategy of restructuring, disposing of non-core activities, and
reducing capex, which are key to our projection of the company deleveraging in

Rating downside could arise if Ciech was unable to deleverage, leading to
adjusted debt to EBITDA of more than 5x. We envisage that this could occur if
margins in Ciech's soda ash business were to deteriorate unexpectedly as a
result of new capacity additions and/or its inability to dispose of
underperforming activities.

Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
Methodology And Assumptions: Liquidity Descriptors For Global Corporate
Issuers, Sept. 28, 2011
Principles Of Credit Ratings, Feb. 16, 2011
Rating Government-Related Entities: Methodology And Assumptions, Dec. 9,
Criteria Guidelines For Recovery Ratings On Global Industrial Issuers'
Speculative-Grade Debt, Aug. 10, 2009
Key Credit Factors: Business and Financial Risks In The Commodity And
Specialty Chemical Industry, Nov. 20, 2008
2008 Corporate Criteria: Analytical Methodology, April 15, 2008
2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
2008 Corporate Criteria: Rating Each Issue, April 15, 2008
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at All ratings affected
by this rating action can be found on Standard & Poor's public Web site at Use the Ratings search box located in the left
column. Alternatively, call one of the following Standard & Poor's numbers:
Client Support Europe (44) 20-7176-7176; London Press Office (44)
20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm
(46) 8-440-5914; or Moscow 7 (495) 783-4009.
Primary Credit Analyst: Paulina Grabowiec, London (44) 20-7176-7051;
Secondary Contact: Karl Nietvelt, Paris (33) 1-4420-6751;
Additional Contact: Industrial Ratings Europe;
Company — Ciech
  • Full name
    Ciech SA
  • Registration country
  • Industry
    Chemical and petrochemical industry