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Fitch cuts Dow Chemical, S&P, Moody's may cut
NEW YORK (Reuters) - Fitch Ratings on Thursday cut its ratings on Dow Chemical (DOW.N) while Moody's Investors Service and Standard & Poor's said they may cut them, citing the company's acquisition of rival Rohm & Haas ROH.N.
Dow Chemical on Thursday said it would buy Rohm & Haas for about $18.8 billion including $3.5 billion of assumed debt in a move to broaden its product offerings in higher-margin markets.
Dow's leverage due to the transaction will increase to 2.4 times debt-to-EBITDA, or earnings before interest, taxes, depreciation and amortization -- if the acquisition is financed as currently expected -- from 1.7 times as of March 31, 2008, Fitch said in a statement.
Fitch cut Dow's senior unsecured debt one notch to "BBB-plus," the third-lowest investment grade, from "A-minus." It may cut Dow again and may also cut Rohm and Haas from its current "BBB-plus" rating, it said.
Moody's said the acquisition will result in an increase in debt, though it will also improve Dow's growth potential and make earnings and cash flow more stable.
Moody's now rates Dow Chemical's senior unsecured debt "A3," the seventh-highest investment grade. Moody's said it may also downgrade Rohm & Haas, which it now rates "Baa1," or one notch lower than Dow Chemical.
S&P said in a statement that the acquisition will clearly give Dow Chemical a more aggressive financial profile, but its rating is likely to remain investment grade. It now rates Dow Chemical "A-minus," the seventh-highest investment grade on its rating scale.
S&P said it expects the deal initially to be financed with debt and proceeds from $4 billion of convertible preferred shares.
A decision on the rating will focus on the components of the financing and whether Dow Chemical uses proceeds from a pending joint venture with Petrochemical Industries Co to reduce debt financing, S&P said.
S&P said it may raise, lower or affirm Rohm & Haas' "BBB" rating, the second-lowest investment-grade rating.
(Reporting by Dena Aubin and Karen Brettell; Editing by Jan Paschal)
