Fitch rates Lyondell notes BB-

Fitch Ratings said it assigned a BB- to Lyondell Chemical Co.'s new $1.775 billion senior unsecured notes due 2014 and 2016 and affirmed the company's BB- issuer default rating, BB+ senior secured credit facility and term loan, BB+ senior secured notes and debentures and B senior subordinated notes.

The outlook is stable.

Proceeds will be used to fund a tender offer for Lyondell's $849 million 9 5/8% senior secured notes due May 1, 2007 and to repay a portion of the seven-year term loan used to finance Lyondell's Aug. 16 acquisition of Citgo Petroleum Corp.'s 41.25% interest in the Lyondell-Citgo Refining LP.

Fitch said the ratings are supported by the increased access to cash flow from Lyondell-Citgo as a result of its acquisition. Given the fact that the refinery will be operating under a new crude supply agreement and Fitch's outlook for continued strength in refining margins, the agency expects Lyondell's benefit as the sole owner of Lyondell-Citgo will offset the initial increase in debt that funded the purchase. Additionally, Lyondell is expected to benefit from Lyondell-Citgo's unique operating capabilities, its advantaged location and recent capital investments made to the refinery.

Lyondell's exposure to potential weakness in methyl tertiary butyl ether markets and the loss of profitability if alternative products are produced remains a concern, the agency said, as does continued volatility of raw material prices and its impact on demand, dividends and debt levels.

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