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Rating Action:

Moody's rates Airgas' new notes Baa3; ratings remain under review

27 Sep 2010

Approximately $ 250 million of rated debt affected

New York, September 27, 2010 -- Moody's Investors Service assigned a Baa3 rating to $250 million of guaranteed unsecured five year notes to be issued by Airgas Inc. Airgas entered into a new four year $750 million unsecured credit facility on September 13, 2010. Proceeds from the notes offering will be used to refinance debt outstanding under its new $750 million credit facility. The ratings are currently under review, direction uncertain, due to Air Products and Chemical Inc.'s (A3, Prime-2, under review for downgrade) unsolicited all cash offer in February 2010 to acquire Airgas in a transaction valued at roughly $7.5 billion, based on a revised offer by Air Products on September 7, 2010.

RATINGS RATIONALE

"Airgas continues to refinance and extend maturities despite the recent election of Air Products' slate of directors. This offering reinforces management's belief that it can fend off the takeover offer and that it will remain an independent company," stated John Rogers, Senior Vice President at Moody's.

At Airgas' September 15, 2010 annual meeting, its shareholders voted for the three directors nominated by Air Products. These three nominees joined Airgas' board on September 23, 2010. At the same time Airgas' board reappointed Peter McCausland, Airgas' CEO, to the board. Also a majority of votes cast, representing less than 50% of the shares outstanding, voted in favor of Air Products' bylaw amendment proposal make certain changes including moving the next Meeting of Stockholders to January 18, 2011. The validity of these proposals will continue to be litigated in the Delaware Chancery Court. The next court date is set for October 4, 2010.

Airgas' Baa3 ratings reflect its leading market share in packaged gases in North America, significant customer density due to bolt-on acquisitions, the stability of credit metrics over the business cycle, substantial operational and customer diversity, and roughly $500 million of yearly cylinder rental income. The impact of the US recession on Airgas' credit metrics was very modest relative to most other industrial companies and financial metrics have risen above pre-crash levels. The new notes contain a change of control provision that would allow bondholder to put the debt back to the company at 101 based upon several events including if another company acquires more than 50% of its outstanding shares.

Airgas' ratings remain under review, direction uncertain, due to the lack of visibility on the ultimate financing for the proposed acquisition by Air Products. The review will focus on the ultimate impact to Airgas' bondholders as a result of the success or failure of the proposed acquisition. Prior to the hostile takeover offer from Air Products, Airgas' rating outlook had been positive due to its improving financial performance along with the expectation of further debt reduction which has continued since the ratings were placed under review.

Ratings assigned and under review, direction uncertain:

Airgas Inc.

..Guaranteed unsecured notes due in 2015 at Baa3

Ratings remaining under review, direction uncertain:

Airgas Inc.

..Issuer rating at Baa3

..Guaranteed unsecured notes at Baa3

..Guaranteed senior subordinated notes due 2018 at Ba1

The principal methodology used in rating Airgas Inc 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.

Airgas Inc., headquartered in Radnor, PA, is the largest independent distributor of industrial, medical and specialty gases and related equipment in North America. Airgas reported $3.9 billion in revenue for the LTM 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.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service 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 the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
John Rogers
Senior Vice President
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
250 Greenwich Street
New York, NY 10007
USA

Moody's rates Airgas' new notes Baa3; ratings remain under review
No Related Data.
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