Fitch Ratings Affirms Eastman Chemical at 'BBB/F2'

CHICAGO--(Business Wire)--Fitch Ratings affirms Eastman Chemical Company's (Eastman) debt
ratings as follows:

-- Issuer Default Rating (IDR) 'BBB';

-- Senior unsecured credit facility 'BBB';

-- Euro unsecured term loan 'BBB';

-- Senior unsecured notes and debentures 'BBB';

-- Short-term IDR and commercial paper 'F2';

The Rating Outlook remains Stable. The ratings cover approximately
$1.6 billion of debt outstanding as of Sept. 30, 2007.

The ratings are supported by Eastman's favorable operating
performance, stable debt level, and ample liquidity. Cash balances
remain high due to several divestitures however, free cash flow
remains positive as well. Eastman's diverse product portfolio allows
for greater financial flexibility and helps mitigate overall impact of
weak results of any one segment. Strong operating performance from
Eastman's Coatings, Adhesives, Specialty Polymers, & Inks (CASPI),
Performance Chemicals & Intermediates (PCI), Specialty Plastics (SP)
and Fibers segments continue to offset the weak performance of its
Performance Polymers segment. Fitch expects Eastman's actions,
including divestitures of non-core and non-integrated polyethylene
terephthalate (PET) assets and higher production utilizing IntegRex
manufacturing technology, to improve its PET business by lowering its
cost structure. However, market conditions for PET producers are
expected to continue to be poor as the industry absorbs new capacity
and manages volatile raw materials costs.

The rating rationale also incorporates Eastman's leading market
position in cellulose acetate fibers and vertical integration.
Additionally, Eastman has a manageable debt maturity schedule and
ample liquidity. High priorities for cash are to fund capital
expenditures, share repurchases, and dividends. Debt repayment is
likely to occur as it matures. Capital expenditures are expected to
increase substantially and consume the majority of free cash flow
generated by Eastman during the next few years. Cash flow will be
applied to multiple growth initiatives related to the Fibers and PET
businesses as well as coal gasification projects. Potential rating
concerns include the potential for softening demand with volatile raw
material prices and slower economic growth. If cash flow from
operations is lower than expected, there may be a need for additional
debt financing to fund capital initiatives in later years. In the
medium term, Fitch expects cash priorities of Eastman to be met with
available cash, cash flow from operations and potential project
financing, as it relates to future coal gasification projects.

The Stable Outlook reflects solid performance of the CASPI, PCI,
SP and Fibers segments. Eastman's credit metrics are expected to
remain within the rating category during the next 12 to 18 months.
Earnings for most chemical producers are expected to be near or at a
mid-cycle level in 2008.

At Sept. 30, 2007, Eastman had a total balance sheet debt and
total adjusted debt of $1.59 billion and $2.30 billion, respectively.
Total adjusted debt includes accounts receivable balance plus gross
rental expense. For the latest 12-months ending Sept. 30, 2007,
Eastman had a total debt-to-Operating EBITDA of 1.71 times (x), total
adjusted debt-to-Operating EBITDAR of 2.30x, and Operating
EBITDA-to-gross interest expense of 7.97x.

Eastman is a multinational chemical producer with a diverse and
broad product portfolio serving the following key markets: packaging,
tobacco, transportation, building and construction, consumables,
health/wellness, durables, and graphic imaging. Eastman generated
EBITDA of $933 million on $7.26 billion sales for the latest 12 months
ending Sept. 30, 2007. Eastman is also a major producer of PET for
packaging and one of the world's two largest producers of cellulose
acetate fibers.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Jennifer Quinn, +1-312-368-3344 (Chicago)
Randall Biang, +1-312-606-2342 (Chicago)
Brian Bertsch, +1-212-908-0549
(Media Relations, New York)

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