TEXT-S&P: DuPont ratings unchanged on coating business sale

Thu Aug 30, 2012 3:59pm EDT

Aug 30 - Standard & Poor's Ratings Services said today that its ratings on
E.I. DuPont de Nemours & Co. (A/Stable/A-1) remain unchanged following
DuPont's announcement that it has reached an agreement to sell its performance
coatings business to the Carlyle Group for approximately $4.9 billion in cash.
DuPont intends to use net after-tax proceeds from the transaction, which it
expects to close by the first quarter of 2013, primarily to strengthen its
balance sheet. 

DuPont's credit measures are currently subpar for the ratings following its 
May 2011 acquisition of food ingredient and enzyme producer Danisco A/S for 
about $7 billion. As of June 30, 2012, funds from operations-to-net adjusted 
debt was 24%, well below our expectation of 35% to 40% at the current ratings. 
Notwithstanding the near-term impact of a tepid global economy, we expect 
DuPont's credit measures to strengthen to levels commensurate with the ratings 
during the next two years, in part as a result of the expected net debt 
reduction with the proceeds of this sale. We also expect earnings and cash 
flow to improve as a result of favorable conditions in certain key end 
markets, such as agriculture and automotive and a continued brisk pace of new 
product introductions. We view the sale of the coatings business as a further 
positive step in the transformation of DuPont's business mix away from more 
cyclical, lower-margin businesses in favor of more stable, higher-margin 
businesses, such as Danisco.
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