TEXT-Fitch rates Westlake Chemical proposed notes

Tue Jul 10, 2012 1:15pm EDT

July 10 - Fitch Ratings has assigned a 'BBB-' rating to Westlake 
Chemical Corporation's (Westlake; NYSE: WLK) proposed $250 million
10-year notes. The Rating Outlook is Stable. A complete list of ratings follows
at the end of this press release.

The notes will be senior unsecured obligations of Westlake, guaranteed by 
material subsidiaries and will rank equally with the company's other senior 
unsecured debt, totaling $754 million as of March 31, 2012. The company had a 
total of $765 million of long-term debt at March 31, 2012. Westlake plans to use
the net proceeds and cash on hand to fund its redemption of its $250 million 6 
5/8% Notes due 2016 and the premium associated with the redemption. The notes 
are being issued under a supplemental indenture to the company's original 
indenture dated Jan. 1, 2006. Key covenants included restrictions on secured 
debt, sale and leaseback transactions, and merger and asset sales. There are no 
financial covenants. The notes will have make whole call provisions as well as a
put option upon a change of control and a downgrade of the notes below 
investment grade.

Fitch affirmed Westlake's ratings on May 18, 2012. The ratings reflect the 
company's strong liquidity, conservative capital structure, and solid free cash 
flow generation. Westlake's operations benefit from low-cost ethane based 
feedstock production and tight polyethylene supply as a result of capacity 
shutdowns during the recession and recovering demand. Roughly 4% of North 
American polyethylene capacity was shuttered from 2008 through 2010. Plans to 
increase Westlake's backward integration should reduce exposure to cost 
pressures. Fitch expects the vinyls business to remain challenged by excess 
capacity and weakness in the construction market.

For 2012, Fitch expects Westlake to generate at least $650 million in EBITDA and
to burn up to $110 million in cash given the capital spending guidance of $400 
million. Fitch expects Westlake to return to free cash flow generation 
thereafter as current projects are completed. 

Westlake's total debt to latest 12 months (LTM) EBITDA as of March 31, 2012, was
1.3 times. The company has significant liquidity with $895 million of cash and 
$384 million available after utilization for letters of credit under its $400 
million asset-based lending (ABL) revolving credit facility maturing September 
2016. The facility has a 1:1 fixed charges covenant at such times that the 
borrowing availability is less than the greater of (1) 12.5% of commitments and 
(2) $50 million. The company has no short-term debt maturities. After redeeming 
its 2016 notes, the company's next maturity will be the proposed notes due in 
2022. 

The Stable Outlook reflects Fitch's expectation that Westlake will generate 
positive free cash flow on average against a backdrop of benign industry 
conditions. 

Fitch would consider a negative rating action should there be a substantial 
change in the company's strong financial profile whether the result of a 
sustained cyclical downturn, a sizable leveraged acquisition, or a substantial 
recapitalization. 

Fitch would consider a positive rating action if Westlake meaningfully increases
its geographic and product diversification while maintaining good margins, 
consistent free cash flow generation and strong financial profile. 

Fitch currently rates Westlake as follows: 
--Issuer Default Rating (IDR) 'BBB-';
--Senior secured ABL facility 'BBB';
--Senior unsecured notes 'BBB-'. 
The Rating Outlook is Stable.