S&P affirms Rhodia

Standard & Poor's said it affirmed its B long-term and B short-term corporate credit ratings and CCC+ senior unsecured debt rating on Rhodia SA and removed the ratings from CreditWatch, where they had been placed on Dec. 24, 2003. The outlook is stable.

The rating action follows the successful completion of the group's recent recapitalization measures. S&P said the recapitalization averted a potential near-term liquidity crisis due to the significant decline in the group's cash flow generation in 2003 and the acceleration of some of the group's long-term financial debt.

Net proceeds raised through the recapitalization amount to almost €1.2 billion before fees and expenses and consist of about €470 million from an equity rights issue and €700 million from high-yield bonds maturing in 2010. In addition, a new refinancing facilities agreement with a syndicate of banks was made available to Rhodia on May 14. The agreement will expire in March 2006.

The recapitalization will be complemented by an asset disposal program, which is expected to raise more than €700 million of proceeds during the next few months, including about €400 million from already agreed transactions. Furthermore, two large-scale savings initiatives target about €245 million in additional annual cost reductions by the end of 2006.

"The combined effects of these measures should enable Rhodia to meet its financial and operating cash requirements until the first quarter of 2006," said S&P credit analyst Christine Hoarau. "We expect that Rhodia's near-term liquidity provisions should be sufficient to cover the group's cash requirements during the two-year implementation phase of its restructuring program, and that the group's financial performance will gradually improve over time as a result of cost savings."

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