FRANKFURT (Reuters) - BASF (BASF.DE: Quote, Profile, Research, Stock Buzz) intends to increase the leverage on its balance sheet, the German chemical producer's chief financial officer Kurt Bock told the Reuters Chemicals Summit on Thursday.
A number of companies are increasing leverage to boost returns to shareholders, leading some to suffer credit ratings downgrades.
According to Reuters data, BASF's long-term debt-to-equity ratio is 0.22, compared with drugs and chemicals group Bayer's (BAYG.DE: Quote, Profile, Research, Stock Buzz) 0.65.
"We will leverage our balance sheet. It's a no-brainer," Bock said at the Chemical Summit at Reuters offices in Frankfurt.
BASF, the only remaining chemical company with an AA- rating from Standard & Poor's and the equivalent Aa3 from Moody's Investors Service, feels comfortable with its credit rating, but would be flexible in the future, Bock said.
"Is it a huge plus to have an AA- rating in terms of financing costs? Actually, no. Is it an issue of pride? No. But this is still a hypothetical question."
In January, Standard & Poor's affirmed BASF's AA- ratings, but with a negative outlook, citing its appetite for acquisitions, along with share buybacks and high dividend payments.
The ratings agency said on January 19 that the expected cost and debt burden of the acquisition of Degussa's DGXG.N construction and chemicals unit and the hostile bid for U.S. chemicals firm Engelhard (EC.N: Quote, Profile, Research, Stock Buzz) would be manageable within the current rating.
Bock said BASF still had a commercial paper program of about $5 billion, with which the company could fund its acquisition of the Degussa unit.
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