Moody's rates Resolution Performance notes B2

Moody's Investors Service assigned a B2 rating to Resolution Performance Products LLC's new $140 million senior secured notes. Moody's also affirmed the company's B2 senior implied and B1 senior secured credit facility ratings and downgraded its senior second secured notes to B3 from B2 and its senior subordinated notes to Caa2 from Caa1.

The outlook was revised to negative from stable.

Moody's said the ratings reflect Resolution's high leverage with pro forma debt to actual EBITDA (adjusted for the financing) of 13 times for the last 12 months ended Sept. 30, a significant deterioration in 2003 operating performance, the cyclical nature of the company's commodity products and its raw material feedstocks (including phenol, propylene, chlorine and acetone), the risk of foreign exchange rate fluctuations, and customer concentration with the top 20 customers accounting for about 54% of 2002 revenues.

The agency said the ratings are supported by improvements in liquidity following completion of the new financing, significant cost reduction activities, and the strong performance of the versatics business.

The ratings also are supported by the company's leading global market positions in the epoxy resins and versatic acids businesses, long-standing customer relationships, its low cost industry position, modest capital expenditure requirements, backward integration to the principal epoxy resin intermediates (BPA and ECH), and global world-scale manufacturing capability in the epoxy resin industry.

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