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Rating Action:

Moody's upgrades Cytec's ratings to Baa2

Global Credit Research - 11 Nov 2010

Approximately $640 million of long-term debt securities affected

New York, November 11, 2010 -- Moody's Investors Service upgraded Cytec Industries Inc.'s (Cytec) senior unsecured debt ratings to Baa2 from Baa3 (see list below). The upgrade reflects Moody's belief that the company has made significant progress improving credit metrics, and, year-over-year improvements in revenue and EBITDA. Over the last year Cytec has outperformed many companies in the chemical industry and when combined with debt reduction current credit metrics support a Baa2 rating. Moody's also expects that Cytec's ongoing business profile and growth strategies will also result in credit metrics that are in keeping with a one notch upgrade to Baa2. The outlook is stable.

"Moody's does not anticipate material changes in management's conservative financial policies specifically as it relates to acquisitions and programs to reward shareholders," said Moody's analyst Bill Reed.

The following summarizes the Cytec ratings activity:

Ratings upgraded

Senior unsecured notes 4.60% due 2013 -- raised to Baa2 from Baa3

Senior unsecured notes 6.0% due 2015 -- raised to Baa2 from Baa3

Senior unsecured notes 8.95% due 2017 -- raised to Baa2 from Baa3

Senior unsecured shelf -- raised to (P)Baa2 from (P)Baa3 and (P)Baa3 from (P)Ba1

RATINGS RATIONALE

The Baa2 ratings reflect Cytec's moderate leverage; product, customer, and geographic diversification; good business scale; and leading market positions in such products as carbon fiber, mining chemicals and eco friendly resins. Cytec's ratings are supported by a relatively stable portfolio of businesses that even while being pressured by the difficult economic climate in late 2008 and early 2009 have since produced solid operating margins. Moreover the $150 million in balance sheet debt reduction, and material increases in operating cash flows over the last six quarters have been bolstered by management's cost saving and restructuring efforts. The ratings reflect our expectation that the company will continue to generate over $80 million of free cash flow over 2011. Cytec's history of operating performance and free cash flow generation along with management's success in implementing productivity and cost saving initiatives also provide support to the rating. Historically, Cytec's management has a positive track record of bolstering liquidity during times of operational weakness, and we believe various restructuring initiatives produced positive results. The Baa2 ratings continue to reflect our belief that the company will generate at least $250 million of cash from operations in 2011 and that EBITDA to interest will remain on average above 8.0 times over the next two years. Furthermore Cytec should be able to generate annual credit metrics that support the Baa2 rating, including retained cash flow to total debt averaging 30% and free cash flow to total debt averaging 14% over the next two years with the benefit of cash generated from operations and past restructuring initiatives.

The stable outlook reflects Moody's expectation that the company will generate at least $200 million of free cash flow in 2010, and that it will sustain the current volume of business in 2011. The ratings have limited upgrade potential until management further demonstrates its ongoing financial philosophy for the company. Specifically, Moody's expects management to pursue bolt-on acquisitions in order to grow the business in excess of GDP growth rates. After this period, if stronger-than-expected demand results in a sustainable annual retained cash flow to adjusted debt above 30% a positive ratings action of no more than one notch might be possible. Conversely, the ratings or outlook could be lowered if a debt-financed acquisition or a reversal in recent positive demand trends results in adjusted debt to EBITDA exceeding 3.0 times. Moody's notes that further debt reduction in 2011 and 2012 is likely to be limited. Moody's has factored into its stable outlook bolt-on acquisitions, modest share repurchase programs and dividend increase as appropriate mechanisms to return cash to shareholders. Moody's believes that these shareholder rewards will remain consistent and balanced with the goal of maintaining a Baa2 investment grade profile.

The principal methodology used in this rating was Global Chemical Industry rating methodology published in December 2009.

Cytec, headquartered in Woodland Park, New Jersey, is a global producer of a diverse range of specialty chemicals and materials for industries including aerospace, plastics, inks, adhesives and automotive. Cytec operates through the following five business segments: Coating Resins, Additive Technologies, In Process Separation, Engineered Materials, and Building Blocks. Revenues were $3.3 billion for the LTM ended September 30, 2010.

REGULATORY DISCLOSURES

Information sources used to prepare the credit 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 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
William Reed
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
John Rogers
Senior Vice President
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
U.S.A.

Moody's upgrades Cytec's ratings to Baa2
No Related Data.
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