Fitch lifts Terra view to positive, rates note B+

Fitch Ratings said it assigned a B+ rating with a recovery rating of RR4 to Terra Capital, Inc.'s proposed senior unsecured notes due 2017 and revised the outlook to positive from stable.

The agency also affirmed the issuer default rating at B+; Terra Capital's senior secured credit facility, senior secured notes and second-priority senior secured notes at BB+/RR1; Terra Industries, Inc.'s convertible preferred shares at B-/RR6; and Terra Nitrogen, LP's senior secured credit facility rating at BB+/RR1.

Proceeds from the new notes will be used, along with balance sheet cash, to fund Terra Capital's tender offer for its outstanding $200 million 12 7/8% senior secured notes due 2008 and $131.3 million 11 ½% second-priority senior secured notes due 2010. Additionally, the maturities of Terra Capital's $150 million senior secured credit facility and Terra Nitrogen's $50 million senior secured credit facility will be extended by four years to 2012.

The agency said that the refinancing, once complete, is expected to reduce Terra's annual cash interest expense and extend maturities and that lower interest expense and extended maturities may help Terra better manage future cyclical downturn conditions. Total debt would be flat as a result of the refinancing transactions.

The positive outlook reflects Fitch's expectations that financial performance will be strong in 2007 due to encouraging market dynamics and that the company's total debt-to-operating EBITDA ratio will decline to under 2x for 2007.

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