Research Update: Four Core Units Of Formosa Plastics Group Upgraded To 'A-' On Improved Debt Leverage; Outlook Stable

Taiwan-based FP group has reduced leverage significantly over the past two to three years through strong operating cash flow. Meanwhile, the improving industry structure in China and the group's substantial progress to differentiate its products could lead to more sustainable profits and cash flow as a buffer against the next industry downturn. We believe that the group's low leverage and improved operating cash flow provide sufficient financial buffer to fund its large expansion in the U.S. and weather market volatility while still maintaining the ratio of FFO to debt above 45% during the expansion period. We are raising the rating on the four core members of the FP group to 'A-' from 'BBB+'. At the same time, we are also

...+ Taiwan-based FP group has reduced leverage significantly over the past two to three years through strong operating cash flow. Meanwhile, the improving industry structure in China and the group's substantial progress to differentiate its products could lead to more sustainable profits and cash flow as a buffer against the next industry downturn. + We believe that the group's low leverage and improved operating cash flow provide sufficient financial buffer to fund its large expansion in the U.S. and weather market volatility while still maintaining the ratio of FFO to debt above 45% during the expansion period. + We are raising the rating on the four core members of the FP group to 'A-' from '###+'. At the same time, we are also raising the issue rating on the senior unsecured notes issued by Formosa Group (Cayman) Ltd. and unconditionally and irrevocably guaranteed by the four core companies to 'A-' from '###+'. + The rating outlook is stable to reflect our view that the group will maintain...

Research Update