Chemicals sector continues to feel squeeze, notes UniCredit

With Moody's placing Switzerland-based Clariant's Baa3 rating on review for potential downgrade, UniCredit posits that the company could be the next 'fallen angel'. Clariant's liquidity is based on approximately $231 million (CHF 270 million) of cash and $643 million (CHF 750 million) under its credit facility agreement. However, the credit facility is restricted by a covenant.

Clariant's five-year credit default swap widened to 520/540 basis points on Friday, already reflecting 'junk' levels.

The global chemical sector is struggling, as shown by multinational LyondellBasell Industries' credit event trigger in January. UK-based British Vita also triggered a credit event for LCDS holders. (It has not filed for bankruptcy, as we said incorrectly in an earlier version of this article). British Vita has entered a standstill agreement with creditors on a payment that was due.