Fitch ups Terra note to BB+

Fitch Ratings said it upgraded the rating on Terra Capital, Inc.'s 11½% second-priority senior secured notes to BB+ with a recovery rating of RR1 from BB with a recovery rating of 2.

In addition, Fitch affirmed Terra Industries, Inc.'s issuer default rating at B+ and convertible preferred shares at B-/RR6; Terra Nitrogen LP's issuer default rating at B+ and senior secured credit facility at BB+/RR1; and Terra Capital Inc.'s issuer default rating at B+, senior secured credit facility at BB+/RR1 and 12 7/8% senior secured notes at BB+/RR1.

The outlook is stable.

Fitch said the upgrade was driven by an increase in expected principal recovery in the updated analysis of a liquidation scenario. Terra's strong market positions in U.S. and U.K. nitrogen fertilizer markets and manageable debt level support the ratings.

The ratings also reflect the company's earnings and cash flow volatility, narrow product portfolio and exposure to volatile natural gas prices, the agency said.

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