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Rating Action:

Moody's raises Huntsman's CFR to Ba3 from B1

14 Mar 2012

Approximately $3.9 billion of debt securities affected

New York, March 14, 2012 -- Moody's Investors Service upgraded the corporate family rating (CFR) for Huntsman Corporation (Huntsman) and Huntsman International LLC (HI), a subsidiary of Huntsman, to Ba3 from B1, and upgraded other ratings as appropriate (see ratings list below). The outlook for all of Huntsman's ratings is changed to stable from positive. The upgrade of the CFR to Ba3 reflects improvements in three of the company's main businesses (polyurethanes, performance products and pigments businesses), along with the overall strengthening of its credit profile.

"The upgrade reflects Huntsman's strong operating performance, improving credit metrics, and good liquidity profile evidenced, in part, by the lack of sizeable near term debt maturities until 2016," said Moody's analyst Bill Reed.

The following summarizes the ratings activity:

Ratings Raised

..Issuer: Huntsman Corporation

....Corporate Family Rating, Upgraded to Ba3 from B1

....Ratings Assigned

....Probability of Default Rating Ba3

Ratings Withdrawn

.Speculative grade liquidity assessment SGL-2

Ratings Raised

..Issuer: Huntsman International LLC

....Corporate Family Rating, Upgraded to Ba3 from B1

....Probability of Default Rating to Ba3 from B1

....Senior Secured Bank Credit Facility, to Ba1 LGD2/27% from Ba2 LGD2/24%

....Senior Subordinated Regular Bond/Debenture, to B2 LGD6/93% from B3 LGD5/89%*

Ratings Affirmed

..Issuer: Huntsman International LLC

....Senior Unsecured Regular Bond/Debenture, B1 LGD5/72% from LGD4/60%

Ratings Assigned

..Issuer: Huntsman International LLC

....Senior Secured Bank Credit Facility Term Loan B, Ba1 LGD2/27%

....Senior Secured Bank Credit Facility Term Loan C, Ba1 LGD2/27%

.Speculative grade liquidity assessment SGL-2

Outlook Actions:

..Issuer: Huntsman Corporation

....Outlook, Changed To Stable from Positive

..Issuer: Huntsman International LLC

....Outlook, Changed To Stable from Positive

*The ratings on a small tranche of subordinated debt will be withdrawn upon redemption.

RATINGS RATIONALE

The Ba3 CFR takes into account 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. Any improvement in the housing or additional strength in the automobile markets would result in further cash flow improvement. For the full year 2011 HI generated over $1.1 billion in adjusted EBITDA, a record level for the company. This level of EBITDA results in debt/EBITDA of 4.5x (adjusted for loans from Huntsman), a significant improvement when compared to the 5.8x one year prior. Going forward, we expect that the company will continue to generate improved levels of EBITDA and reduce balance sheet debt, further strengthening HI's credit metrics and profile.

Further 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 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.

In our August 2011 research announcement we noted management suggested that over the course of the next year or so (by the end of 2012), cash flow permitting, they would consider paying down an additional $500 - $700 million of debt. Through March 2012 we estimate that about $316 million of balance sheet debt has been repaid or is expected to be redeemed. As documented above, we believe that strengthening the company's balance sheet position, according to senior management is a very high priority of Huntsman's Board of Directors.

HI's liquidity profile is good reflecting strong cash balances ($554 million at the end of 2011 for both Huntsman and HI combined), the prospect of improving cash flow, the recent $100 million increase in HI's revolver to $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 stable outlooks reflects HI's improved credit metrics and good liquidity profile. The outlook incorporates the expectations that the company will continue to improve its credit metrics without materially increasing its leverage. Still, the company's executive chairman has also recently expressed disappointment with the share price in the low teens. Moody's notes that if the share price were to remain at this level for an extended period of time, it could increase the chances for event risk.

Should the company amortize between $400-500 million of additional debt from free cash flow over the next two years, we could consider a higher rating. We would consider a negative rating action if EBITDA on a quarterly basis is not sustained above $100 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 rating Huntsman Corporation 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 billion for the last twelve months ending December 31, 2011.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

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

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

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 raises Huntsman's CFR to Ba3 from B1
No Related Data.
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