NOVA Chemicals Corporation: Rating Report

On January 31, 2020, DBRS Limited (DBRS Morningstar) changed the trends on NOVA Chemicals Corporation’s (NOVA or the Company) ratings to Negative from Stable and confirmed the ratings at BBB (low). The Negative trends reflect higher leverage as NOVA partially funded a $1.08 billion litigation payment with debt and is going through a significant period of softness in its end markets. NOVA made the litigation payment to Dow Chemical Canada ULC and Dow Europe (collectively, Dow) related to the operation of their jointly owned ethylene 3 (E3) cracker in Joffre, Alberta, from 2001 to 2012, which will negatively pressure the ratings going forward. However, the rating confirmation considers NOVA’s adequate liquidity post-litigation payment and recent actions aimed to preserve cash flow. Furthermore, while the ratings continue to reflect some level of implicit support from NOVA’s parent, Mubadala Investment Company PJSC (Mubadala, wholly owned by the Abu Dhabi Government), it does not support the ratings as robustly as previously noted.