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Rating Action:

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

13 Sep 2010

New York, September 13, 2010 -- Moody's Investors Service assigned a B3 rating to Huntsman International's LLC (HI), proposed new $350 million senior unsecured subordinated note issue. 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 and possibly for general corporate purposes. HI is a subsidiary of Huntsman Corporation (Huntsman -- B1 Corporate Family Rating). The outlook is stable.

Rating Assigned:

Issuer: Huntsman International LLC

Senior Subordinated Notes, B3, LGD6, 91%

RATINGS RATIONALE

"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 may reduce the level of debt maturing in 2013. 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 high leverage at this point in the chemical cycle, exposure to rising prices in some feedstocks, and possible future weakness in many key end markets, notably automotive and housing. Huntsman's B1 CFR also reflects the decline in business performance in 2009 and the expectation of a recovery in several of Huntsman's key end markets. The 2009 decline is evidenced by a 19% drop in adjusted EBITDA to $517 million. This level of EBITDA results in debt/EBITDA of 9.4X; however, on an LTM basis for the period ending June 30, 2010 adjusted EBITDA grew to $784 million resulting in a leverage ratio of 6.0X.

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 June 2010 were some $766 million versus $1.7 billion at the end of 2009. Liquidity is also provided by a $225 million revolver due in 2014 and an accounts receivable program. Concurrent with the bond offering, HI is seeking to increase its revolver from $225 million to up to $300 million. 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 two quarters of 2010 adjusted EBITDA was $136 million and $271 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 principal methodology used in rating Hunstman International LLC was Global Chemical Industry rating methodology published in December 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found 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 $8.7 billion, down from $10.2 billion in 2008, for the LTM period ending June 30, 2010.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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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
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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