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Rating Action:

Moody's changes Huntsman's outlook to positive

29 Mar 2013

New York, March 29, 2013 -- Moody's Investors Service moved the outlook of Huntsman Corporation (Huntsman) and its subsidiary (Huntsman International LLC) (HI) to positive from stable. We also affirmed each company's Ba3 Corporate Family Rating (CFR), along with all outstanding debt ratings for Huntsman and HI. The positive outlook reflects continued improvements across the company's main product lines, even as its pigments businesses retracts, along with the overall strengthening of its credit profile. The positive outlook also reflects the $250 million of balance sheet debt reduction in 2012 leading to expected stronger credit metrics in 2013.

"The positive outlook reflects Huntsman's improving credit metrics evidenced, in part, by the lack of sizeable near term debt maturities until 2017," said Moody's analyst Bill Reed. "Improvements in key end markets have helped bolster the company's cash flow generation that may result in meaningful debt reduction over the next 12-18 months."

Ratings Affirmed

..Issuer: Huntsman Corporation

.Corporate Family Rating at Ba3

.Probability of Default Rating at Ba3-PD

..Issuer: Huntsman International LLC

.Corporate Family Rating at Ba3

.Probability of Default Rating at Ba3-PD

....Senior Secured Bank Credit Facility, Ba1 (LGD2, 25%)

....Senior Unsecured Regular Bond/Debenture, B1 (LGD5, 70%)

....Senior Subordinated Regular Bond/Debenture, B2 (LGD6, 93%)

Outlook Actions:

..Issuer: Huntsman Corporation

....Outlook, Changed To Positive from Stable

..Issuer: Huntsman International LLC

....Outlook, Changed To Positive from Stable

RATINGS RATIONALE

The Ba3 CFR considers Huntsman's strong competitive position in key businesses and significant competitive barriers, including process know-how and the benefits of integrated world scale production capabilities. The ratings are nevertheless tempered by high leverage and relatively small amounts of free cash flow generation after dividends at this point in the chemical cycle, even after record EBITDA generation. Other concerns include the company's ongoing exposure to rising prices in some feedstocks and ores, and ongoing weakness in key end markets, notably housing and geographically in Europe and Asia. Any improvement in the housing or additional strength in the automobile markets would result in further cash flow improvement.

In 2012 HI generated over $1.485 billion in adjusted EBITDA, a record level for the company and Moody's expects a similar amount for full year 2013. This level of EBITDA results in debt/EBITDA of 3.85x (adjusted for loans from Huntsman), a significant improvement when compared to the 5.8x at the end of December 2010.

Going forward, we expect that the company will continue to generate reasonable levels of EBITDA and reduce balance sheet debt, further strengthening HI's credit metrics and profile. Additional support for the rating is based on management's public statements they would like to see their unadjusted net debt leverage at about 2 to 2.5 times on a normalized EBITDA basis. Management's public statements in this regard have been consistent over the last several years and they have indicated that they will limit acquisition activity in order to hit those target levels. In the 2011 and 2012 annual letter from the President and CEO, he wrote that reducing debt remains a focus of the board and management team based on the belief that less debt on the balance sheet will enhance shareholder value in the long term.

Over 2012 some $250 million of debt at the HI level was paid down, bringing balance sheet debt at HI to $3.7 billion and Moody's would expect to see a similar amount or more repaid in 2013. Moody's believes that both Huntsman's senior management and its Board of Directors view strengthening the company's balance sheet position by reducing debt as a very high priority.

HI's liquidity profile is good reflecting strong cash balances ($387 million at the end of December 2012 for both Huntsman and HI combined -- with $210 at HI). Liquidity is further supported by the prospect of stable cash flow, the size of HI's revolver at $400 million, the extension of its bank credit facility maturities to 2017 and the goal of management to maintain liquidity at close to $1 billion in the form of cash, accounts receivable securitization and revolver availability. The B1 rating on HI's notes reflects their unsecured position in the capital structure.

The positive outlook reflects HI's improved credit metrics and. should the company amortize between $200-300 million of additional debt from free cash flow over the next 6 - 9 months while maintaining leverage below 3.5x, we could consider a higher rating. We would consider a negative rating action if EBITDA on a quarterly basis is not sustained above $200 million level. Finally, there would be negative pressure on the rating if a large acquisition or a significant shareholder friendly action were to meaningfully reduce cash balances and increase debt levels.

The principal methodology used in this rating was the Global Chemical Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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 $11.2 billion for the twelve months ending December 31, 2012.

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.

end

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.

William Reed
VP - Senior Credit Officer
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

Steven Wood
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 changes Huntsman's outlook to positive
No Related Data.
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