Fitch Rates Millennium America Inc.'s New Sr. Secured Credit Facility 'BB+'

Business Wire, August 10, 2005

CHICAGO -- Fitch Ratings has assigned a 'BB ' (R1) to the new US$250 million five-year guaranteed secured bank facility of Millennium America with Millennium Inorganic Chemicals (MICL), a co-borrower under the facility. This facility replaces an existing secured credit facility that was due to mature in June 2006 that was also rated 'BB '. Both Millennium America Inc. and MICL are subsidiaries of Millennium Chemicals, Inc. which is a subsidiary of Lyondell Chemical. In addition, Fitch affirms Millennium America's senior unsecured notes at 'BB' (R2) as well as Millennium Chemical's convertible senior unsecured debentures rating at 'BB' (R2). Millennium's Issuer Default Rating (IDR) is 'B '. The Rating Outlook remains Stable.

The new senior secured credit facility consists of a US$100 million Australian term facility and a US$150 million revolving credit facility divided into two parts: a US$125 million U.S. tranche and a US$25 million Australian tranche. The US$125 million U.S. tranche is secured by a lien on domestic accounts receivable and inventory, which should provide more than adequate coverage even on a distressed basis. In addition, this facility has a lien on 65% of the capital stock of Millennium's international subsidiaries and a first priority lien on dividends from Equistar. Furthermore, this tranche is guaranteed by Millennium Chemical, and Millennium US Op Co. LLC, the primary operating subsidiary of Millennium America. The US$25 million Australian tranche and US$100 million Australian term facility are secured by substantially all of Millennium's tangible and intangible assets in Australia.

The rating affirmation for Millennium is supported by its business portfolio, market positions in North America and Europe, 29.5% equity interest in Equistar, and earnings leverage during the peak of the chemical cycle. The ratings also consider the cyclical nature of its commodity products and Lyondell's ownership of the company. Concerns include temporary margin pressure as the company realizes price increases for its products and future cash outflows for distributions to Lyondell. Currently, Millennium cannot declare dividends to Lyondell due to certain restrictions in its existing bond indentures. Fitch expects Millennium will be able to declare material dividends to Lyondell in 2006 as a result of improvement in net earnings and increased distributions from Equistar over the next nine to 18 months.

The Stable Rating Outlook for Millennium reflects the improvement in Millennium's acetyls and specialty chemicals businesses and the strengthening of supply demand fundamentals for TiO2. The petrochemical and titanium dioxide industries are realizing higher operating rates and tightening of supply/demand fundamentals, which have enabled producers to increase prices. Margin expansion occurred in 2004 and is expected to continue in 2005 as market fundamentals strengthen.

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