Why invest in Solvay bonds?

Credit markets are of particular importance to Solvay as they provide financial funding at optimal conditions. By purchasing Solvay bonds, creditors can invest in an attractive company :

  • Multi-specialty chemical player with sustained margins, offering growth and improving returns, with a geographically-balanced diversified portfolio providing resilience
  • Strong sustainability and innovation-led offering addressing society’s challenges
  • Efficient and cost-effective capital structure - part of a prudent, investment-grade, funding strategy
  • Balanced debt profile, deleveraging supported by portfolio management  and cash generation
  • Strong commitment to investment grade and stable credit ratings
  • High support from family shareholders, enhancing long-term visibility

 

Read Solvay fact sheet

A reliable partner in financial markets

The capital structure of the Group consists of net debt and equity including perpetual hybrid bonds (perpetual hybrid bonds are nevertheless considered as debt in the Group’s underlying metrics). We aim at:

  • optimizing the Group’s capital structure and reduce financial charges

  • remaining fully committed to an investment grade rating and to the permanence and significance of hybrids as part of our financing strategy.

The Treasury department, along with Solvay CFO Karim Hajjar, therefore reviews the Group capital structure on an ongoing basis. Solvay works with banking partners of the highest creditworthiness (selection based on major rating systems) and minimizes the concentration of risk by limiting its exposure to each of these banks to a certain threshold.

 

Financial discipline to minimize the cost of debt

Over the past few years, Solvay's portfolio transformation has been accompanied by a significant improvement in cash generation and a progressive deleveraging.

Solvay financial health

Looking at the last three years, we see a continuous improvement in the way we conduct business, with an average increase of 19% of our underlying EPS on the activities in our portfolio. 

We recorded a strong cash flow increase in 2018, following a consistent increase since 2015. And while returns to the shareholders grew, we also managed to reduce our debt. 

Since the Cytec acquisition in 2015, we have consistently been reducing the indebtedness every year, leading to a total reduction by 22% after three years: 40% through operational deleveraging and 60% through divestitures. 

The underlying leverage ratio, which measures our capacity to repay this debt over time, has improved accordingly from 2.8x at the end of 2015 to 2x at the end of last year.

We have also reduced our provisions taken in the past for pensions, environmental and other liabilities, ending 10% better compared to 2015 (1/3rd due to operational deleveraging and 2/3rd through divestments).

 

Credit profile: balanced maturity allowing flexibility

Debt maturity profile as of September 30, 2019

Solvay bonds maturities november 2019

[1] Major debt only, excluding cost of currency swaps, including a new issuance of €600 million on Sep 6, 2019
[2] At first call date
[3] US$1,160 million, after early repayment of US$800 million on Sep 30, 2019
[4] Solvay exercised the first call option on the €700 million hybrid bond on May 12, 2019

More information on Solvay bonds

 

Strong liquidity reserves 

The Group has access to a Belgian Treasury Bill program for €1.5 billion and, alternatively, to a US commercial paper program for US$500 million. The higher ceiling of these two programs is covered by a back-up credit line that amounts in total to ~€3 billion.

As of the end of 2018, the Group had strong liquidity reserves :

  • € 1.1 billion in cash and equivalents,  namely other current financial instruments

  • € 3.0 billion of committed credit facilities

    • a multilateral revolving credit facility of € 2.0 billion (Maturity: 2022, with extension options until 2024) 

    • an additional € 1.0 billion from bilateral revolving credit facilities with key international banking partners 

Integrating sustainability into all key aspects of our business, including financing

Solvay has set ambitious extra financial targets for 2025: we are committed to maximizing delivery, and determined that these goals will be met responsibly. As part of this policy, we enhanced our greenhouse gas reduction goal even further linking our sustainable purposes directly with our financial ones. 

Solvay has agreed new terms in the existing €2 billion revolving credit facility, linking the cost of credit to a reduction in greenhouse gases. Solvay concluded this positive incentive agreement with its syndicate of nine banks.

How does it work in practice?

Solvay mandated BNP Paribas Fortis to introduce a Positive Incentive Loan mechanism that supports the Group ambitions in reducing greenhouse gas emissions. 

Maintaining our credit ratings

Find hereafter Solvay credit ratings, awarded by Standard & Poor’s & Moody’s, resulting from transparent and regular discussions with the leading rating agencies and a comprehensive analysis of all available information.

 
Rating agencies Long-term rating Outlook Date
Standard & Poor's BBB stable 2018
Moody's Baa2 stable 2018