OREANDA-NEWS. Fitch Rating says that Lafarge SA's (BBB-/Positive) repurchase of a nominal amount of EUR2.25bn in bonds is supportive of the company's credit profile, by improving financial flexibility and reducing its interest burden. The repurchase will result in a reduction equivalent to around 17% of gross adjusted debt at end-2014.

The liability management transaction demonstrates financial support by the new parent LafargeHolcim Ltd (BBB/Stable) to its legal subsidiary, Lafarge SA. It is also the next logical step towards further financial integration in the merger of Lafarge SA and LafargeHolcim Ltd, given Lafarge SA's more expensive debt (around 150bps to 180bps, as per Fitch estimate). The combined group's treasury will be managed centrally, including cash pooling and funding, although we believe that it will take time until the two systems are fully integrated and Lafarge SA's remaining debt has been fully refinanced.

Lafarge SA was last upgraded on 15 July 2015. The upgrade of the ratings reflected Lafarge SA's strong strategic ties and pending operational integration with the former Holcim Ltd, following the completion of the merger between the two companies to create LafargeHolcim Ltd. Fitch maintains a one-notch differential between LafargeHolcim Ltd and Lafarge SA, because the parent does not currently guarantee the subsidiary's still substantial debts. Lafarge SA's debts have no recourse to the assets of the former Holcim Ltd (i.e. LafargeHolcim Ltd excluding Lafarge SA) and no cross-defaults to its debt.