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S&P: Millennium on negative watch
Standard & Poor's said it placed its ratings on Millennium Chemicals Inc. on CreditWatch with negative implications following the announcement that the company will merge with Houston-based Lyondell Chemical Co. in a stock transaction.
Ratings placed on CreditWatch with negative implications include Millennium Chemicals Inc.'s corporate credit rating at BB- and senior unsecured notes at BB- (guaranteed by Millennium America Inc.); and Millennium America's senior secured bank loan rating at BB and senior unsecured notes at BB- (guaranteed by Millennium Chemicals Inc.).
Ratings affirmed include Lyondell Chemical's corporate credit rating at B+/stable/--, senior secured debt at B+, and subordinated debt at B-; and Equistar Chemicals LP's corporate credit rating at B+/stable/--, senior unsecured notes at B+, and secured bank loan at BB-.
S&P said the CreditWatch placement reflects the future ownership by the highly leveraged Lyondell, and the strong likelihood that the ratings on Millennium will be lowered modestly upon completion of the proposed transaction.
At the same time, S&P affirmed the ratings on Lyondell Chemical and its 70.5%-owned affiliate, Equistar Chemicals. S&P's approach to Equistar has been to closely align the ratings on the company to its majority owner, Lyondell.
S&P noted that overall, the transaction is expected to bolster Lyondell's business profile through an increased participation in the cyclical recovery in Equistar's businesses, and will add a measure of diversification to Lyondell's product portfolio. While Millennium's businesses have been subject to many of the same pressures faced by Lyondell in recent years, including elevated energy costs and weak demand, Millennium's TiO2 business will add a solid position in an organic product category that does not rely on petrochemical feedstocks.
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