TEXT-S&P affirms Lyondell Chemical ratings

reuters.com Fri February 21, 2003 11:11 AM ET (The following statement was released by the ratings agency)

NEW YORK, Feb 21 - Standard & Poor's Rating Services said today that it has affirmed its ratings on Lyondell Chemical Co., including its 'BB' corporate credit rating, and removed the ratings from CreditWatch following indications that business disruptions related to reduced crude oil deliveries from Venezuela to one of Lyondell's affiliates, 58.75%-owned Lyondell-CITGO Refining LP, would be limited in terms of the potential affect on Lyondell's credit profile. The current outlook is negative.

Standard & Poor's said that at the same time it revised its outlook on Houston, Texas-based Equistar Chemicals LP, which is 70.5%-owned by Lyondell Chemical Co., to negative from stable. Standard & Poor's affirmed its 'BB' ratings on the company.

"The ratings affirmation follows Lyondell's announcement that it has restored operating rates at Lyondell-CITGO to near-normal levels," said Standard & Poor's credit analyst Kyle Loughlin. "Earlier this year, Lyondell-CITGO's business was disrupted by a lack of crude availability from Venezuela's state owned oil company, PDVSA, related to a general strike against the Chavez administration. While cash distributions to Lyondell are expected to fall short of earlier expectations, despite Lyondell-CITGO's recent ability to obtain and process crude from alternative sources, it now appears that other credit concerns, such as the risk that Lyondell would find it necessary to use its credit capacity to support Lyondell-CITGO, will be resolved satisfactorily."

Standard & Poor's said that the Equistar outlook revision follows disappointing fourth quarter results, which underscore the ongoing challenges faced by petrochemical companies in the current operating environment. Equistar's operating profits declined sharply from the previous quarter as rapid increases to raw material costs eroded margins, while demand showed some weakness due to seasonal issues and economic malaise. "These results raise concern that anticipated improvements to the financial profile may be delayed further, particularly if geopolitical turbulence forestalls recent efforts to expand margins in the face of raw material pressures," said Mr. Loughlin. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.