Moody's assigns spec rating on Lyondell $3.25bn debt issue

15 March 2010 20:33  [Source: ICIS news]

HOUSTON (ICIS news)--Moody's Investors Service on Monday assigned a speculative rating on Lyondell Chemical's $3.25bn (€2.37bn) debt issue that is intended to help company emerge from Chapter 11 bankruptcy protection.

The credit ratings agency assigned a Ba3 rating on a $1bn first-lien term loan and $2.25bn in first-lien seven-year notes.

The Moody's rating places the debt issue at the high end of the firm's speculative grades. Debt rated below investment grade carries higher interest rates.

The Ba3 rating reflects the debt issue's security in Lyondell Chemical's US assets as well as company guarantees, Moody's said.

In addition, Moody's assigned the parent company, LyondellBasell, a B1 corporate family rating, another speculative grade.

LyondellBasell still needs to reduce capacity, especially in Europe, Moody's said. In addition, the company is exposed to volatile feedstock costs and new capacity coming on line over the next two years.

On the other hand, Moody's cited LyondellBasell's limited leverage, large size, vertical integration and leading market position among other factors.

In addition, LyondellBasell has maintained a ratio of less than 5.0x for total debt versus earnings before interest, tax depreciation and amortisation (EBITDA).

Moody's gave LyondellBasell a stable outlook on expectations that the company will continue to improve its cost position and increase free cash flow.

In addition, the company will likely follow conservative financial policies, Moody's said.

Moody's left open the posibility of a ratings upgrade or a positive outlook.

First-quarter margins for olefins and polyolefins were strong, Moody's said. In addition, the spreads among grades of oil has improved, benefiting the company's refinery in Houston.

Lyondell had no comment on the ratings.

Lyondell Chemical filed for Chapter 11 bankruptcy protection in January 2009. It is expected to leave bankruptcy later this year.

($1 = €0.73)

For more on Lyondell visit ICIS company intelligence
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By: Al Greenwood
+1 713 525 2645

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