Fitch downgrades some Lyondell notes

Fitch Ratings said it downgraded Lyondell Chemical Co.'s $100 million 10¼% debentures due 2010 and $225 million 9.8% debentures due 2020 to BB- from BB+ and affirmed the BB- issuer default rating; BB+ senior secured credit facility, term loan and notes; BB- senior unsecured notes; and B senior subordinated notes.

The outlook remains positive.

The company recently began a tender offer for its outstanding 11 1/8% senior secured notes and a consent solicitation for its 10½% senior secured notes.

The agency said the two-notch downgrade of the debentures reflects their junior ranking to existing secured debt and equal ranking with existing and future senior unsecured debt. Under the indentures for these debentures, the debentures must be equally and ratably secured with any debt that is secured by certain manufacturing plants. There are currently no qualifying manufacturing plants securing other debt and, therefore, the debentures are unsecured.

The affirmation of Lyondell's other ratings is supported by the company's better-than-expected cash generation from operations and debt repayment and by its size, high integration of businesses, liquidity and access to capital markets, Fitch said.

The positive outlook reflects the likelihood that Lyondell will be able to accelerate its debt reduction efforts in the next 12 to 18 months and the fact that supply/demand fundamentals continue to be favorable for most of Lyondell's products, the agency said.

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