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Rating Action:

Moody's affirms Dow's ratings following merger announcement; outlook stable

11 Dec 2015

New York, December 11, 2015 -- Moody's Investors Service affirmed the ratings of The Dow Chemical Company (Dow) at Baa2 following the announcement that Dow and E.I. du Pont de Nemours and Company (A3, negative) intend to merge, restructure and combine complementary operations and then split the merged company into three separate companies -- Agriculture, Material Science and Specialty Products. The companies expect to close on this transaction in the second half of 2016 subject to customary shareholder and regulatory approvals, take approximately 18 months thereafter to restructure and combine operations and then split into the three separate companies. Dow's rating outlook remains stable.

"The merger of Dow and DuPont has the potential to create enormous synergies especially in the Agricultural business; however, over the next year, the assets, earnings and cash flows that support Dow's existing debt are not expected to change materially," stated John Rogers, Senior Vice President at Moody's. "Additionally, it may take up to 18-24 months to get greater clarity on the earnings and cash flow that can be generated by the portfolio of assets that will eventually support Dow's debt."

RATINGS RATIONALE

The affirmation of Dow's Baa2 ratings reflects the fact that it will be part of a larger and more profitable company, the expectation for over $3 billion of cost synergies and a significant improvement in the its competitive position in several key businesses, most notably agriculture. On its own, Dow's is one of the largest global chemical producers, has significant geographic and product diversity, strong market positions in construction, transportation and plastics packaging, which will improve when combined with DuPont's complementary products and technology. The Baa2 ratings also reflect Dow's vertical integration, with advantaged feedstocks in North America, profitable joint ventures in the Middle East and Asia. In addition, management has been very consistent and clear about its financial priorities, so there could be upside to the rating over time.

The merger with DuPont will initially be credit positive as it will be part of a larger and more profitable company. However, the intent is to split the entity into three smaller more specialized companies within the next 2-3 years. Dow's rating is tempered by the lack of details regarding the post-merger and post-split legal structures, financial policies, capitalization, and the disposition of pension and legacy liabilities. Additionally, it will take time to get information on the profitability and cash flows of the businesses (New Dow) that will eventually support Dow's existing debt. Moreover, information on the pension and legacy liabilities that will remain at New Dow will also be required to accurately assess its rating.

The stable outlook reflects the assumption that the assets, liabilities, earnings and cash flows that support Dow's debt will not change materially through the end of 2016. As additional information is provided on the balance sheet, income statement and cash flows for the New Dow, Moody's will adjust the rating and outlook as appropriate. Moody's would consider upgrading Dow's ratings if Net Debt/EBITDA is expected to fall sustainably toward 2.5x and Retained Cash Flow/Net Debt is expected to rise toward 25%. Dow's rating could be lowered if Net Debt/EBITDA was expected to rise sustainably above 3.0x and Retained Cash Flow/Net Debt was expected to fall sustainably below falls 20%.

Affirmations:

..Issuer: Dow Chemical Company (The)

.... Issuer Rating, Affirmed Baa2

.... Commercial Paper, Affirmed P-2

....Multiple Seniority Commercial Paper, Affirmed P-2

....Senior Unsecured Shelf, Affirmed (P)Baa2

....Pref. Shelf., Affirmed (P)Ba2

....Senior Secured Bank Credit Facility, Affirmed Baa2

....Senior Unsecured Medium-Term Note Program (Local Currency), Affirmed (P)Baa2

....Senior Unsecured Medium-Term Note Program (Local Currency), Affirmed (P)P-2

....Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)Baa2

....Senior Unsecured Medium-Term Note Program (Foreign Currency), Affirmed (P)P-2

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Dow Chemical Company (The)

....Outlook, Remains Stable

..Issuer: Dow Capital B.V.

....Backed Senior Unsecured Medium-Term Note Program, Affirmed (P)Baa2

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

....Senior Unsecured Shelf, Affirmed (P)Baa2

Outlook Actions:

..Issuer: Dow Capital B.V.

....Outlook, Remains Stable

..Issuer: Iberville (Parish of) LA

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

....Backed Senior Unsecured Revenue Bonds, Affirmed P-2

..Issuer: Kanawha (County of) WV, County Commission

....Backed Revenue Bonds, Affirmed Baa2

..Issuer: Michigan Strategic Fund

....Backed Senion Unsecured Revenue Bonds, Affirmed P-2

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

..Issuer: Midland County Economic Development Corp., MI

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

....Backed Senior Unsecured Revenue Bonds, Affirmed P-2

..Issuer: Morton International Inc.

....Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Morton International Inc.

....Outlook, Remains Stable

..Issuer: New Jersey Economic Development Authority

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

....Backed Senior Unsecured Revenue Bonds, Affirmed P-2

..Issuer: Port Freeport, TX

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

....Backed Senior Unsecured Revenue Bonds, Affirmed P-2

..Issuer: Rohm and Haas Company

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Rohm and Haas Company

....Outlook, Remains Stable

..Issuer: Rohm and Haas Holdings Ltd.

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Rohm and Haas Holdings Ltd.

....Outlook, Remains Stable

..Issuer: Union Carbide Chemicals & Plastics Co. Inc.

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Union Carbide Chemicals & Plastics Co. Inc.

....Outlook, Remains Stable

..Issuer: Union Carbide Corporation

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Union Carbide Corporation

....Outlook, Remains Stable

..Issuer: West Baton Rouge (Parish of) LA, Ind Dist #3

....Backed Revenue Bonds, Affirmed Baa2

....Backed Revenue Bonds, Affirmed P-2

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

....Backed Senior Unsecured Revenue Bonds, Affirmed P-2

..Issuer: West Side Calhoun Cnty Navigation Distr., TX

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

....Backed Senior Unsecured Revenue Bonds, Affirmed NP

..Issuer: Brazoria County Brazos River Hrbr. Nav. Dist.

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

....Backed Senior Unsecured Revenue Bonds, Affirmed P-2

..Issuer: Brazos Harbor TX, Industrial Development Corp

....Backed Senior Unsecured Revenue Bonds, Affirmed Baa2

The principal methodology used in these ratings was Global Chemical Industry Rating Methodology published in December 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The Dow Chemical Company (Dow) is one of the largest chemical companies in the world, with annual revenues of over $55 billion. Dow has global leadership positions in a broad array of commodity and specialty chemicals/advanced materials, including ethylene, polyethylene, polyurethanes, acrylics, engineered plastics and agricultural seeds and chemicals.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

John Rogers
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Dow's ratings following merger announcement; outlook stable
No Related Data.
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