S&P puts Syngenta at risk of downgrade after China funding questioned
Standard & Poor’s has placed Syngenta’s credit rating on “CreditWatch negative” due to confusion over its support from the Chinese state, putting the Swiss seeds company’s investment grade rating under threat.
Syngenta last week postponed a $7bn bond sale – intended to refinance bridge loans backing the group’s $44bn takeover by ChemChina – as nervous investors questioned its ability to settle class action litigation while maintaining an investment grade rating.
Syngenta carried strong single A credit ratings before ChemChina’s acquisition, but S&P now pegs the company at BBB-, the lowest rung of investment grade.
The credit rating agency said in a report earlier this year that ChemChina had indicated that both it and China’s state-owned Assets Supervision and Administration Commission (Sasac) “remain committed” to maintaining this rating “under all scenarios”. Crucially, S&P said that Sasac would need to provide support to mitigate litigation liabilities with equity, to ensure there is “no additional debt imposed on Syngenta or ChemChina”.
Xiao Yaqing, head of the State Assets Supervision and Administration Commission (Sasac), told the Financial Times last week that he was not aware of S&P’s specific comments, but he was confident ChemChina and Syngenta could handle the matter without a guarantee from Sasac.
“Companies have to resolve these cases on their own,” he said.
S&P said that the news “calls into question the certainty of support that, if needed, could be extended to meet timely payments of Syngenta’s debt obligations, and the consistency of the messages provided to S&P Global Ratings and the investor community”.
The ratings agency said that it plans to resolve the issue “as soon as practically possible” following a discussion with ChemChina to clarify the potential level of support it will offer Syngenta.
“We note that although ChemChina confirmed to us that it remains committed to supporting Syngenta and maintaining the investment-grade rating, it has not provided the investor community with an explicit and transparent statement of support,” the report from S&P added.
“In our view, the company’s communication with different stakeholders has been inconsistent.”