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Rating Action:

Moody's Upgrades Crystal US (Celanese) to Ba3: Outlook Positive

06 Mar 2007
Moody's Upgrades Crystal US (Celanese) to Ba3: Outlook Positive

Approximately $3.6 billion of rated debt affected

New York, March 06, 2007 -- Moody's Investors Service upgraded the corporate family rating (CFR) for Crystal US Holdings 3 LLC, a subsidiary of Celanese Corporation, to Ba3 from B1, and assigned Ba3 ratings to its (Celanese US Holdings LLC) new guaranteed senior secured credit facilities ($600 million multi-currency revolver, $2.8 billion term loans, and $228 million synthetic letter of credit facility). The new debt is being issued to refinance Celanese's existing senior secured term loans, senior subordinated notes, and senior discount notes. Moody's ratings on the existing credit facilities and retired notes will be withdrawn at the conclusion of the refinancing. The outlook for Celanese's long term ratings remains positive.

The following summarizes the ratings activity:

Rating upgrades:

Crystal US Holdings 3 LLC

Corporate family rating -- Ba3 from B1

Probability of default rating -- Ba3 from B1

$339mm 10.5% Sr Discount Notes due 2014, B3 -> B2, LGD6, 95% *

$81mm 10% Sr Discount Notes due 2014, B3 -> B2, LGD6, 95% *

BCP Crystal US Holdings Corp. (renamed Celanese US Holdings LLC)

Credit-linked Letter of Credit Facility, Ba3 -> Ba2, LGD3, 40% *

Gtd Sr Sec Revolving Credit Facility due 4/2009, Ba3 -> Ba2, LGD3, 40% *

Gtd Sr Sec Revolving Credit Facility due 4/2009, Ba3 -> Ba2, LGD3, 40% *

Gtd Sr Sec Term Loan Facility due 4/2011, Ba3 -> Ba2, LGD3, 40% *

Gtd Sr Sec Term Loan Facility due 4/2011, Ba3 -> Ba2, LGD3, 40% *

9.625% Gtd Sr Sub Global Notes due 6/2014, B3 -> B2, LGD5, 88% *

10.375% Gtd Sr Sub Global Notes due 6/2014, B3 -> B2, LGD5, 88% *

* Please note that these ratings will be withdrawn at the conclusion of the refinancing

CNA Holdings, Inc

7.125% Sr. Unsec.MTN due 3/2009, B3 -> B2, LGD6, 93%

Various Pollution Control & Industrial Revenue Bonds due at Various Dates through 2030, B3 -> B2, LGD6, 93%

Rating assignments:

Celanese US Holdings LLC

$600 million Gtd. Sr. Sec. Revolving Credit Facility due 2013 -- Ba3, LGD3, 43%

$2,280 million Gtd Sr. Secured Term Loan B due 2014 -- Ba3, LGD3, 43%

$400 million (EUR) Gtd Sr. Secured Term Loan B due 2014 -- Ba3, LGD3, 43%

$228 million Gtd. Sr. Secured Credit Linked Letter of Credit Facility due 2014 -- Ba3, LGD3, 43%

Rating affirmation:

Crystal US Holdings 3 LLC

Speculative grade liquidity rating -- SGL-1

The upgrade of Celanese's CFR reflects the strong pricing and demand in its Chemical Products businesses (approximately 70% of 2006 revenues), material reduction in interest expense due to the refinancing, improving credit metrics, and resolution of the minority shareholder issue at Celanese AG. Celanese is currently capitalizing on the very strong operating environment in acetyls, acetate and Ticona being driven by increased demand and relatively high industrial utilization rates. Moody's also believes that with the comprehensive refinancing, the company will have enhanced ability to de-lever in a timely fashion.

The ratings take into account Celanese's strong competitive position in key businesses and significant competitive barriers, including process know-how and requirements for world scale production capabilities. The ratings are tempered by its leverage at this point in the commodity cycle, significant exposure to volatile petrochemical feedstocks, on-going acquisition activity that has prevented material reduction of debt, and significant debt-like obligations of $1.2 billion (for pensions and operating leases).

As of December 31, 2006, Celanese's leverage remains elevated with roughly $3.5 billion of balance sheet debt. However debt to EBITDA has declined significantly over the past two years and is currently at 3.0 times; retained cash flow to total debt is 24% and free cash flow to total debt is almost 13% (metrics exclude extraordinary items). When utilizing Moody's Standard Adjustments, which also include the capitalization of pension obligations ($541 million) and operating leases ($654 million), debt rises to almost $4.7 billion, debt to EBITDA is 3.5 times, retained cash flow to total debt is 20% and free cash flow to total debt is 9.2%. Post refinancing proforma credit metrics show further improvement due to reduced interest expense and reduction in debt by roughly $200 million.

The positive outlook reflects Moody's expectation that the acetyls business will remain strong for much of 2007 and into 2008, providing good liquidity and the opportunity to reduce debt further using free cash flow and cash. This will substantially improve the company's credit profile and raise its metrics to be much closer to investment grade over the cycle. In addition, Celanese continues to pursue cost reduction opportunities, synergies from acquired businesses, and will continue to benefit from an advantaged long-term methanol supply agreement. To the extent that over the next 12-15 months the company continues to generates EBITDA over $1.3 billion (Moody's standard adjustments add over $110 million to EBITDA) and free cash flow at least in the $200-250 million range, maintains margins despite a possible decrease in acetyl pricing due to the expected decline in methanol prices (from the recent record levels), and keeps debt at or below the post refinancing levels, Moody's could raise the company's ratings by one more notch.

The notching of the senior secured credit facilities at the same level as the CFR reflects the predominance of secured bank debt in the new capital structure, less subordinated debt cushion beneath it, and insufficient collateral coverage. The recent sale of certain US assets in the oxo products and derivatives business further reduced the available collateral. The unsecured debt instruments are junior to a large amount of secured debt having a 93% loss given default rate, and thus are rated two notches below the CFR.

The affirmation of Celanese's speculative grade liquidity rating at SGL-1 reflects the company's sizable cash balance ($250-300 million post transaction proforma cash balance) as well as the expected level of free cash flow that will be generated in 2007 (over $200 million), and access to the vast majority of its $600 million credit facility. Moody's does not foresee any significant usage of the new revolver over the next twelve months due to good free cash flow generation and a cash balance that will likely remain sufficient. Celanese's financial covenant obliges the company to maintain maximum total senior secured leverage of 3.9 times. Moody's notes that this financial covenant is only effective once there is an outstanding balance under the revolving credit facility; Moody's would expect Celanese to be well in compliance with this covenant.

Celanese Corporation, headquartered in Dallas, Texas, is a leading global producer of acetyls, emulsions (including vinyl acetate monomer), acetate tow and engineered thermoplastics. Celanese reported sales of $6.7 billion for the fiscal year ending December 31, 2006. Crystal US Holdings 3 LLC (CUSH) is a subsidiary of Celanese. BCP Crystal US Holdings LLC and Celanese Americas Corporation (CAC) are subsidiaries of CUSH and co-borrowers under the credit facilities. CNA Holdings Inc. is a subsidiary of CAC and the holding company for Celanese's North American operating companies.

New York
John Rogers
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Oman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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