16 December 2008 23:52 [Source: ICIS news]
HOUSTON (ICIS news)--Standard & Poor's Ratings Services (S&P) may downgrade Hexion Specialty Chemicals and Huntsman, even though the companies reached a settlement over their botched merger, the firm said on Tuesday.
Many of Hexion's customers are in cyclical industries such as construction, S&P said. Such industries are vulnerable to downturns.
In addition, Hexion is highly leveraged, as the company has a ratio of nine regarding its total debt to earnings before taxes, interest, depreciation and amortisation (EBITDA), S&P said.
As such, the ongoing economic downturn could further deteriorate Hexion's financial-risk profile, which is already stretched, S&P said.
In regards to Huntsman, S&P said it needs to see how the company spends the money from the settlement.
Most likely, Huntsman will spend the money to reduce debt and bolster liquidity, S&P said.
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