Fitch lifts Lyondell, Equistar, Millennium outlook to positive

Fitch Ratings said it affirmed the ratings for Lyondell Chemical Co., Equistar Chemicals LP, Millennium Chemicals Inc. and Millennium America Inc. following Lyondell's announcement that it will sell its worldwide inorganic chemicals business for $1.2 billion, including the assumption of certain liabilities directly related to the business. The transaction is expected to include a cash payment of $1.05 billion and result in after-tax proceeds of $975 million.

Rating affirmed include Lyondell's BB- issuer default and senior unsecured note ratings, BB+ senior secured credit facility and note ratings and B senior subordinated note ratings; the B+ issuer default ratings of Equistar, Millennium Chemicals and Millennium America; Equistar's BB+/RR1 senior secured credit facility and BB-/RR3 senior unsecured notes; Millennium Chemicals' BB/RR2 convertible senior unsecured debentures; and Millennium America's BB+/RR1 senior secured credit facility and term loan and BB/RR2 senior unsecured notes.

The outlook was revised to positive from stable to reflect the continued favorable supply/demand fundamentals for most of Lyondell's products, the likelihood that Lyondell will be able to accelerate its debt reduction efforts in the next 12 to 18 months and the agency's expectation that continued strong operations from petrochemical and refining operations are likely to offset other cyclical businesses within the portfolio.

The affirmation for Lyondell's ratings are supported by expected accelerated debt repayment in the near term following the sale of the inorganic chemicals business, Lyondell's better-than-expected cash generation and debt repayment during 2006, Fitch's expectation that debt reduction targets could potentially be met during 2008 and the company's size, integrated businesses in refining, petrochemicals and performance products, liquidity and access to capital markets.

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