Dow credit rating plunges near junk on Rohm and Haas deal

01 April 2009 22:43  [Source: ICIS news]

HOUSTON (ICIS news)--Standard & Poor's Ratings Service (S&P) lowered on Wednesday its ratings for Dow Chemical to BBB-, barely above the speculative grade of BB, after the company completed its takeover of Rohm and Haas.

S&P estimated that the deal was worth roughly $19bn (€14bn), including assumed debt and Dow's $78/share offer price.

To close the deal, Dow has taken on substantial debt at a time of uncertainty in the petrochemical industry and the world economy, S&P said.

As it is, Dow has a $12.5bn bridge loan, which it will try to retire at the end of the year, the company said.

S&P said it may lower Dow's ratings further. Such a downgrade would depend on the company's first-quarter results and any other plans to reduce the company's debt.

In the past, Dow has said that maintaining its investment-grade rating was among its top priorities.

Already, Dow has cut its dividend by 64% to 15 cents/share.

Although the Rohm and Haas deal stretched Dow's finances, it also strengthened the company's portfolio of specialty products, S&P said. "We believe the transaction is an important strategic initiative for Dow," the firm said.

Dow stock closed at $8.81 on the New York Stock Exchange, up 4.51%.

($1 = €0.75)

For more on Dow or Rohm and Haas visit ICIS company intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Al Greenwood
+1 713 525 2645

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