S&P cuts Lyondell, Equistar ratings

Standard & Poor's said it lowered its corporate credit rating on Houston-based Lyondell Chemical Co. to B+ from BB- and lowered its corporate credit rating on Lyondell's 70.5%-owned subsidiary, Equistar Chemicals LP, to B+ from BB-.

S&P also downgraded Lyondell Chemical's senior secured debt to B+ from BB- and subordinated debt to B- from B, as well as Equistar Chemicals' senior unsecured notes to B+ from BB- and $250 million secured bank loan to BB- from BB.

The outlook on both companies is stable.

S&P said that the downgrades follow Lyondell's announcement of weaker-than-expected fourth-quarter and full-year 2003 operating results, which underscored the increasing vulnerability of Lyondell's businesses in an environment of elevated and more volatile raw material costs, and the diminishing profitability from Lyondell's large methyl tertiary butyl ether business.

The disappointing results at the important Equistar venture are of particular concern given that the eventual recovery of Equistar's businesses is likely to provide Lyondell with the best prospects for reducing its onerous debt burden in advance of pending debt maturities.

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