S&P changes Kraton Polymer outlook to stable

Standard & Poor's said it revised its outlook on Kraton Polymers LLC and its parent, Polymer Holdings LLC, to stable from negative, assigned a recovery rating of 2 to Kraton Polymer's bank loan and affirmed the companies' ratings, including Kraton Polymer's B+ corporate credit and senior secured bank loan ratings and B- subordinated notes and Polymer Holdings B- senior unsecured discount notes.

S&P said the outlook revision reflects the trend of improving operating performance over the past year. Through greater focus on pricing initiatives and better operating efficiency, Kraton was able to increase margins in a very challenging raw material environment.

While raw materials are expected to remain elevated in 2006, the agency predicted that Kraton should be well positioned to preserve or slightly improve its financial profile through a continued focus on pricing and cost-reduction efforts.

S&P said the ratings are constrained by the company's weak business risk profile derived from its narrow focus on the styrenic block polymers market, the difficult raw-material environment and a highly leveraged financial profile. Debt, adjusted for capitalized operating leases, to EBITDA is about 5.3x.

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