Celanese Downgraded on Debt Recovery Concerns

| About: Celanese Corporation (CE)

Moody's Investors Service (NYSE:MCO) has reportedly affirmed the long-term debt ratings and lowered its outlook for two subsidiaries of Celanese Corporation (NYSE:CE) − Crystal U.S. Holdings 3 LLC and Celanese U.S. Holdings LLC. Moody's has downgraded Celanese's outlook to stable from positive, citing slower-than-expected recovery of debt credit metrics. Moody's affirmed its "Ba2" non-investment grade rating on Celanese's long-term debt. The agency considers debt rated “Ba” to have questionable credit quality. As of Sep 30, 2009, Celanese reported long-term debt of $3.3 billion. Short-term debt totaled $265 million.

Moody’s believes that though Celanese is expected to benefit from its expansion efforts next year, the company is least likely to use cash for debt repayments. The rating agency expects Celanese to use cash for capital investments, acquisitions and to expand its product portfolio instead of paying down debt.

Dallas, Texas based Celanese Corporation is a leading global hybrid chemical company. Celanese is one of the world’s largest producers of acetyl products as well as a leading global producer of high-performance engineered polymers. It is the world’s leading producer of acetic acid and vinyl acetate monomer, with market shares of 28% and 30%, respectively. About two-thirds of production is sent downstream to other business units in the company. The company’s global market share in the acetate tow business is 30%. In the Engineered Products business, Celanese grows at 6% per year, and the bulk of the sales are made to the auto industry.

Recently, Celanese acquired the long-fiber reinforced thermoplastics (NYSE:LFT) business of FACT GmbH (Future Advanced Composites Technology) of Kaiserslautern, Germany, a unit of the Ravago Group. FACT is a leading producer of long-fiber reinforced thermoplastics (LFT) used in injection moulding, extrusion, compression moulding and blow moulding applications. The acquisition will support Celanese’s Advanced Engineered Materials segment, specifically Ticona Engineering Polymers, by building upon Ticona’s LFT process technology and broadening specific product offerings to improve the capability to grow with its customers through a new production site in Kaiserslautern. Celanese expects the acquired business to help grow its Celstran product line, expand industry coverage and synergize development capabilities to serve the automotive industry and general industrial applications.

Shares of Celanese Corporation slipped 0.15% post Moody’s downgrade. We reaffirm our Neutral recommendation on the stock.