Fitch upgrades Rhodia

Fitch Ratings said it upgraded Rhodia SA's issuer default rating to BB- from B+, €300 million revolving credit facility to BB+ from BB, senior notes due 2010 and 2013 to BB- from B+ and the senior subordinated notes due 2011 rating to B from B-.

The outlook is stable.

The agency said the upgrade reflects Rhodia's improved credit metrics as a result of successfully streamlining the business by selling non-core assets and restructuring underperforming businesses. These measures have translated into considerably improved EBITDA levels, which, in combination with recent debt prepayments, is expected to result in improved coverage ratios.

The recent downward volatility in the price of carbon emission credits has not affected Rhodia's ratings. While the existence of carbon emission credits represents a potential positive factor, Fitch said it continues to remain cautious regarding their monetization and subsequent impact on the credit profile due to their size and inherent volatility.

The net debt-to-adjusted EBITDA ratio at the end of 2006 was 2.9x before accounting for the cash inflow resulting from the sales of the company's silicones business and 2.4x after accounting for the cash inflow. This compares with 3.5x at the end of 2005.

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