Moody's rates Rhodia notes, loan

Moody's Investors Service said it has assigned a prospective B3 rating to the new €625 million notes issuance of Rhodia SA and a new B2 rating to the €638 million medium-term and €119 million short-term bank facilities of Rhodia SA.

At the same time, Moody's has affirmed the current B2 senior implied, B3 senior unsecured notes and issuer ratings as well as the Caa1 senior subordinated notes' ratings of Rhodia SA.

The outlook remains negative.

Moody's said the affirmation of the current ratings reflects: a) a resolution and signing of a medium-term financing plan for the group for which Moody's expects all conditions precedent to have been met effective implementation on May 15; b) a higher-than-expected underwritten equity issuance amounting to €471 million in gross proceeds (vs. previously anticipated €300 million) which will be used almost entirely to reduce debt; c) the realization of €320 million in gross disposal proceeds from the food additives sale at a higher-than-expected multiple and the growing expectation that the group will meet or exceed its target disposal proceeds for the year at multiples that will allow for group deleveraging.

The positives continue to be balanced by what Moody's says are: a) a very leveraged group financial profile with net adjusted debt (adjusted for leases - operating and capital, securitizations, and JV/Associate guarantees)/EBITDAR of 7.0x for 2003; b) weak operating cashflow generation (adversely impacted by restructuring charges) which results in the company relying on disposal proceeds and drawings under debt facilities to fund its ongoing operations and interest payments; c) continued uncertainty concerning the degree of medium-term profit and cashflow improvements to be expected considering in particular Rhodia's susceptibility to high raw material prices and a strong euro exchange rate as well as structural challenges in some of its businesses.

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