Moody’s affirms US Dow’s negative outlook

14 December 2007 18:15  [Source: ICIS news]

HOUSTON (ICIS news)--Moody's rating agency on Friday affirmed a negative credit outlook for US-based chemical producer Dow Chemical  following the announcement of plans to enter into another commodity petrochemical joint venture.

The agency noted a “substantial credit positive” from the influx of $9.5bn (€6.8bn-10.2bn) in exchange for the transfer of assets to the JV from its partner Petrochemicals Industry Co (PIC), a subsidiary of state-run Kuwait Petroleum Corp. However, Dow’s plan to pursue transformative acquisitions by the end of 2008 could cost $10bn-15bn, Moody’s said.

“The magnitude of such a potential transaction or transactions, as well as the time required complete the joint venture and receive cash, does not support a stable ratings outlook at the current time,” Moody’s said in a bulletin.

In the long term, Moody’s said the transaction with PIC would provide substantial value and increase growth in Asia.

"This venture should enable Dow to grow its commodity chemical and polymer market presence in Asia much faster than it could by going it alone. Over the next ten years, 50% of this venture will likely be more valuable to Dow than retaining 100% ownership of these assets," stated John Rogers, senior vice president of Moody's.

Dow and PIC on Thursday announced the JV to take advantage of the Kuwait firm’s access to feedstock and to allow Dow to focus on its strengths in specialty chemicals.

($1.00 = €0.68)


By: John Waggoner
+1 713 525 2653



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