Research Update: BASF SE 'A/A-1' Ratings Placed On CreditWatch Negative Due To COVID-19 Impact

We expect the COVID-19 pandemic to significantly affect the macroeconomic environment, industrial production, and chemicals demand in 2020. We view BASF SE's rating headroom as very limited following a weak second-half 2019, reflecting declining chemicals margins and weak auto markets, which are expected to deteriorate further. We expect S&P Global Ratings-adjusted funds from operations (FFO) to debt to reach about 30%, after about 27.5% in 2019, versus the 35% viewed as commensurate with the rating. We are therefore placing our 'A/A-1' ratings on BASF on CreditWatch with negative implications, reflecting the possibility of a one-notch downgrade due to the effects of COVID-19, which will potentially impair leverage management actions. The CreditWatch negative reflects that we could downgrade BASF by one

...- We expect the COVID-19 pandemic to significantly affect the macroeconomic environment, industrial production, and chemicals demand in 2020. - We view BASF SE's rating headroom as very limited following a weak second-half 2019, reflecting declining chemicals margins and weak auto markets, which are expected to deteriorate further. - We expect S&P Global Ratings-adjusted funds from operations (FFO) to debt to reach about 30%, after about 27.5% in 2019, versus the 35% viewed as commensurate with the rating. - We are therefore placing our 'A/A-1' ratings on BASF on CreditWatch with negative implications, reflecting the possibility of a one-notch downgrade due to the effects of COVID-19, which will potentially impair leverage management actions....

Research Update