S&P lowers Formosa Plastics

Standard & Poor's said it lowered the long-term corporate credit ratings on Formosa Plastics Corp., Nan Ya Plastics Corp., Formosa Chemicals & Fibre Corp. and Formosa Petrochemical Corp. to BBB+ from A-.

The senior unsecured notes of Nan Ya Plastics (Hong Kong) Co. Ltd. was downgraded to BBB+ from A-.

The outlook is stable.

S&P said the actions reflect the weakened financial risk profiles of the Formosa Plastics group due to the severe industry downturn and the likelihood that weak market conditions will continue to pressure the group's profitability and cash flow protection measures over the next two years.

"We expect the FP group's cash flow protection measures to weaken further in 2009, although inventory replenishments have somewhat stabilized product prices recently," S&P analyst Frank Fan said in a statement.

"A prolonged global economic recession and new capacity additions, particularly in the Middle East and mainland China, are likely to constrain recovery of the FP group's operating performance over the next one to two years, despite its strong cost position," Fan said.

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