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Rating Action:

Moody's assigns B3 rating to Huntsman's proposed notes

11 Mar 2010

New York, March 11, 2010 -- Moody's Investors Service affirmed the debt ratings of Huntsman Corporation (Huntsman -- B1 Corporate Family Rating) and Huntsman International LLC (HI), a subsidiary of Huntsman. Moody's also assigned a B3 rating to HI's proposed new $250 million senior unsecured subordinated note and a Ba2 to a bank credit facility (see list below) The proceeds of the new subordinated debt are expected to be used to pay down a portion of HI's existing senior unsecured subordinated debt that has been tendered for. The outlook for Huntsman's and HI's ratings is stable.

"The rating and stable outlook reflects Huntsman's strong liquidity profile evidenced, in part, by the lack of sizeable near term debt maturities until 2013," said Moody's analyst Bill Reed. "The use of proposed note proceeds would reduce the level of debt maturing in 2013 from about $570 million to $320 million. However, if cash balances combined with unused credit facilities become depleted before sales volumes recover, on a sustainable basis, there would be negative pressure on the ratings."

The ratings take into account Huntsman's strong competitive position in key businesses and significant competitive barriers, including process know-how and the benefits of world scale production capabilities. The ratings are nevertheless tempered by very high leverage at this point in the chemical cycle, exposure to rising prices in some feedstocks, and weakness in many key end markets, notably automotive and housing. Huntsman's B1 CFR also reflects the greater than anticipated decline in business performance over the last year and the expectation for a slow recovery in several of Huntsman's key end markets. The decline is evidenced by a 19% drop in adjusted 2009 EBITDA to $517 million. This level of EBITDA results in debt/EBITDA of 9.4X however annualizing the 2009 3rd quarter's $200 million of adjusted EBITDA results in a leverage ratio of 6.6X.

The B1 rating also reflects Huntsman's announced plan to use the cash proceeds of 2008 and 2009 legal settlements, net of reductions in debt, including the committed revolver, to maintain an initial liquidity balance of between $800 million to $1 billion. Huntsman's cash balances at the end of 2009 were some $1.7 billion versus $657 million at the end of 2008. Cash balances are currently estimated to be $1.2 billion reflecting the $382 million used to redeem the convertible note held by Apollo along with seasonal and other recent cash outflows. The B1 CFR is also supported by evidence of quarter over quarter improvement in the generation of EBITDA since the extremely weak quarters at the end of 2008 and the beginning of 2009. At the end of March 31, 2009 adjusted EBITDA was about $50 million. For the last three quarters of 2009 adjusted EBITDA was $96 million, $200 million and $167 million, respectively.

The stable outlook reflects Moody's expectation that Huntsman's substantial liquidity will enable the company to manage through the current downturn. Furthermore it incorporates our current expectation that improving EBITDA combined with excess cash on the balance sheet will enable Huntsman to meet financial covenants as demand returns to more normal volumes in 2010 and 2011.

The following summarizes the ratings activity:

Rating Assigned:

..Issuer: Huntsman International LLC

....Senior Secured Bank Credit Facility due 2014, Ba2 LGD2, 22%

....Senior Subordinated Notes, B3, LGD6, 91%

Ratings Affirmed:

..Issuer: Huntsman Corporation

....Corporate Family Rating, B1

..Issuer: Huntsman International LLC

....Corporate Family Rating, B1

....Probability of default, B1

....Senior Secured Bank Term Facility, Ba2 LGD2, 22% from 20%

....Senior Notes, B1, LGD4, 59% from 55%

....Senior Subordinated Notes, B3 LGD6, 91% from 90%

Moody's covenant office notes that HI's change of control put option in the proposed notes would trigger whether the share acquisition occurs at the parent or issuer level, provided that the third party acquires at least 35% of the outstanding voting capital stock, directly or indirectly, of HI. The covenant carves out certain Huntsman family members (currently at about 20% of voting power) from the 35% threshold percentage requirement. In addition, a 35% voting share acquisition would not trigger the put if a majority of the issuer's then current board of managers approves the transaction, effectively excluding a "friendly" transaction regardless of how many voting shares the third party acquires. We also note that the covenant does not have a "stock-for-stock" merger clause that would trigger the put if a public company with a dispersed shareholder base were to acquire the issuer or its parent. Rather, the covenant is structured to trigger in an LBO, which is less likely in the current market than a strategic M&A transaction.

Moody's most recent announcement concerning the ratings was on August 7th, 2009 when we lowered Huntsman's CFR to B1 from Ba3 given the expectation of very weak performance resulting from the decline in the global economy.

The principal methodology used in rating Huntsman was Moody's Global Chemical Industry rating methodology, published in December 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Huntsman Corporation is a global manufacturer of differentiated and commodity chemical products. Huntsman's products are used in a wide range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining and synthetic fiber industries. Huntsman had revenues of $7.8 billion, down from $10.2 billion in 2008, for the year ending December 31, 2009.

New York
William Reed
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Wood
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns B3 rating to Huntsman's proposed notes
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