S&P raises ratings outlook on ICI following Synetix deal

23 September 2002 18:52  [Source: ICIS news]

LONDON (CNI)--International credit ratings agency Standard & Poor's (S&P) said Monday it has revised its outlook on ICI to positive from stable.

Its decision follows agreement by the UK-based specialty chemicals company to sell its Synetix catalyst business to Johnson Matthey for about £260m ($404m/Euro411m).

At the same time, S&P affirmed its triple-B long-term corporate credit and senior unsecured debt ratings and its A-2 short-term ratings on ICI.

S&P credit analyst Ralf Kortuem explained: "With expected net proceeds after tax and other costs of about £210m, the transaction is an important step in ICI's deleveraging strategy, which is based on a number of disposals, an equity rights issue that raised proceeds of £807m in the first quarter of this year and management's commitment to continue to use free cash flows for further debt reduction." 

Kortuem also pointed out that ICI had also recently disposed of its remaining stake in Huntsman International Holdings LLC for $440m (about Euro447m), although the payment of $280m has been deferred to first half 2003.

S&P now expects ICI to be able to reduce its net debt position to about £1.8bn by the end of this year. As a result, S&P said coverage ratios should strengthen to average levels for a triple-B rating, with funds from operations expected to cover about 30% of projected net debt as of year-end 2002. In the financial year 2003, additional deleveraging is expected, supported by proceeds from disposals and the generation of free cash flows.

"The positive outlook reflects [the view] that ICI should continue to enjoy some earnings resilience, in a weak economic environment," said Kortuem. "Management is considered to remain committed to paying down debt from free cash flows and no debt-financed acquisitions are expected. In addition, coverage ratios are forecast to improve significantly by year-end 2002 and thereafter," he added.

By: Neil Sinclair
+44 20 8652 3214

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