Over the last few weeks, INEOS had to scramble to get a covenant waiver from its lenders, and Lyondell went into Chapter 11. Now Dow's debt is facing a potential cut to junk status from the main ratings agencies.
Dow's rating has already been cut, following the collapse of the K-Dow deal with Kuwait. And the agencies are worried by the lack of a convincing contingency plan to cover the lost cash. The blog suggested this would be required last month. The need is now urgent, due to the perceived lack of long-term financing for the proposed Rohm & Haas acquisition.
Moody's for example, have said they "would not assign an investment grade rating to this company if it had short-term debt of $11 billion to $12 billion". Similarly, S&P have said they want "proof of $15bn in financing to maintain the investment-grade rating". A junk rating would mean tens of millions in dollars in extra financing costs - not something that could be easily absorbed in today's difficult markets.