Fitch Rates Eastman Chemical's Senior Notes 'BBB'

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned a rating of 'BBB' to Eastman Chemical Co.'s (Eastman) issuance of EUR550 million senior unsecured notes due 2023. The Rating Outlook is Stable. A full list of ratings follow at the end of this release.

Eastman intends to use the proceeds from the offering to partially refinance the 2017 notes, and for general corporate purposes.

KEY RATING DRIVERS

Company Profile

The ratings reflect Eastman's diversity of chemical products, strong market positions in key end-user markets, vertical integration of production along its acetyl, polyester and olefin product chains, access to low-cost North American feedstocks and consistent, strong operating margins.

FREE CASH FLOW (FCF) AND EXPECTATIONS

Fitch expects that debt/EBITDA for Eastman will decrease to under 2.5x as the company's robust and growing FCF should allow for additional repayment over the next 18-24 months.

KEY ASSUMPTIONS

Fitch's key assumptions within our rating case for the issuer include:

--Revenue of just over $10 billion;

--EBITDA margin at 23% as lower costs and synergies from acquired businesses flow through and are accretive to earnings;

--Repayment of $1 billion of debt in total since the Taminco acquisition by the second half of 2016.

RATING SENSITIVITIES

Positive: Future developments that could lead to positive rating actions include:

--Total debt-to-EBITDA of 1.5x on a mid-cycle basis in combination with maintenance of annual FCF over $500 million.

Negative: Future developments that could lead to negative rating actions include:

--Debt/EBITDA above 2.5x on a sustained basis;

--Sustained negative FCF leading to incremental borrowings;

--Leveraging events: debt-financed share repurchases, additional leveraging acquisitions, etc.;

--A major operational issue or global recession which pushes EBITDA lower on a sustained basis and is not offset by adjustments in Eastman's cost structure.

FULL LIST OF RATINGS

Fitch currently rates Eastman as follows:

--Long-Term IDR at 'BBB';

--Senior unsecured revolving credit facility at 'BBB';

--Senior unsecured notes/debentures/term loan at 'BBB';

--Short-Term IDR at 'F2';

--Commercial paper at 'F2'.

The Rating Outlook is Stable.

LIQUIDITY

Liquidity is provided by an undrawn $1.25 billion unsecured credit facility (due October 2020). The credit facility backstops Eastman's commercial paper (CP) program, and there was $738 million available due to $512 million of CP outstanding as of March 31, 2016. Total liquidity is $940 million including $202 million of cash on the balance sheet. The company also has a $250 million A/R facility that typically additional liquidity with $60 million of availability as of March 31, 2016.

Date of Relevant Rating Committee: Aug. 31, 2015

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004827

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160520005495/en/

Fitch Ratings, Inc.
Primary Analyst
Greg Fodell
Associate Director
+1-312-368-3117
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Mark C. Sadeghian, CFA
Senior Director
+1-312-368-2090
or
Committee Chairperson
Michael Weaver
Managing Director
+1-312-368-3138
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
[email protected]

Source: Fitch Ratings

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