Fitch affirms Terra Industries

Fitch Ratings said it affirmed Terra Industries Inc.'s B+ issuer default rating, BB+ senior secured credit facilities and 12 7/8% senior secured notes with recovery ratings of RR1, BB 11½% second-priority senior secured notes with a recovery rating of RR2 and B- convertible preferred shares with a recovery rating of RR6.

Fitch also assigned B+ issuer default ratings to Terra Capital, Inc. and Terra Nitrogen, LP.

The outlook is stable.

The agency said the ratings reflect Terra's strong market positions in U.S. and U.K. nitrogen fertilizer markets, manageable debt level, earnings and cash flow volatility, narrow product portfolio and exposure to volatile natural gas prices. While the diversity of Terra's product portfolio is limited to nitrogen products and methanol, strong market presence and manageable debt level are positive credit factors.

Terra has reduced its debt to $354.5 million as of June 30 from a high of $462 million in 2004, but a weaker last-12-month EBITDA of $117.9 million resulted in total debt to operating EBITDA of 3x at June 30.

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