S&P may improve US Dow’s credit outlook

27 January 2010 21:32  [Source: ICIS news]

HOUSTON (ICIS news)--Standard & Poor’s may improve Dow Chemical’s credit outlook in the next two quarters as the chemical major’s financial profile improves, the ratings service said in a report released on Wednesday.

Standard & Poor's (S&P) downgraded Dow to one notch above junk status last year following its $19bn (€13bn) acquisition of Rohm and Haas.

The acquisition “stretched Dow's financial profile at a time of considerable uncertainty in the economic and petrochemical landscape”, prompting S&P to place the company on its CreditWatch listing and to affirm a ‘BBB-’ corporate credit with a negative outlook, the ratings firm said in its report on chemical company credit quality in 2010.

“Since the close [of the sale], Dow has implemented a number of steps that we believe demonstrate its ongoing commitment to maintain investment-grade ratings, and business conditions appear to support further improvement to the financial profile,” S&P said in its report entitled: “Top 10 Investor Questions: North American Chemicals"

S&P credit analyst Kyle Loughlin said Dow fully repaid the bridge loans that were used to help it acquire Rohm and Haas.

S&P said Dow paid off the bridge loans with the proceeds from the issuance of long-term debt and the proceeds from non-core asset divestments.

“We viewed that as pretty aggressive,” he said.

Dow has also improved its operating results, S&P said.

“Unless the operating environment deteriorates unexpectedly, the combination of these trends could support a review and possible revision of the outlook within the next couple of quarters,” S&P said.

“We continue to expect a gradual improvement of Dow's financial profile so that the ratio of adjusted debt to EBITDA [earnings before interest, tax, depreciation and amortisation] will be restored toward the 3x-4x range by the end of 2010.”

Dow’s fourth-quarter earnings results are scheduled to be released on 2 February.

($1 = €0.71)

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By: Brian Ford
+1 713 525 2653



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