Moody's upgrades Rhodia

Moody's Investor's Service said it upgraded Rhodia SA's corporate family rating to B1 from B2, senior unsecured debt ratings to B2 from B3 and senior subordinated debt ratings to B3 from Caa1.

The outlook is stable.

The agency said the upgrade reflects an improvement in Rhodia's operating performance over recent quarters and the stability of the company's liquidity, with no major repayments in 2006 and 2007. The strengthened operating performance has resulted in increased cash flows and lower leverage: at the end of the second quarter, Rhodia reported a last-12-months total adjusted debt to EBITDA ratio of 5.5x times.

The ratings continue to reflect weakness in the company's balance sheet, with a relatively high absolute level of debt and reported negative equity; Rhodia's high exposure to oil-derived raw material prices; the company's lack of track record in maintaining its pricing power in less favorable market conditions; and structural exposure to the dollar/euro exchange rate with 49% of revenues derived outside of Europe, according to Moody's.

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