Fitch Affirms IDRs For Lyondell, Equistar & Millennium; Outlook Revised to Positive

Business Wire, March 5, 2007

CHICAGO -- Fitch Ratings affirms the ratings for Lyondell Chemical Company (Lyondell), Equistar Chemicals L.P. (Equistar), Millennium Chemicals Inc. (Millennium) and Millennium America Inc. following Lyondell's announcement to sell its worldwide inorganic chemicals business for $1.2 billion, including the assumption of certain liabilities directly related to the business. The transaction is expected to include a cash payment of $1.05 billion, and result in after tax proceeds of $975 million.

The affirmed ratings are as follows:

Lyondell

-- Issuer default rating (IDR) at 'BB-';

-- Senior secured credit facility and term loan at 'BB ';

-- Senior secured notes and debentures at 'BB ';

-- Senior unsecured notes at 'BB-';

-- Senior subordinated notes at 'B'.

Equistar

-- Issuer default rating (IDR) at 'B ';

-- Senior secured credit facility at 'BB /RR1';

-- Senior unsecured notes at 'BB-/RR3'.

Millennium Chemicals Inc.'s (Millennium):

-- Issuer Default Rating (IDR) at 'B ';

-- Convertible senior unsecured debentures at 'BB/RR2'.

Millennium America Inc.:

-- Issuer Default Rating (IDR) 'B ';

-- Senior secured credit facility and term loan 'BB /RR1';

-- Senior unsecured notes 'BB/RR2'.

At the same time, the Rating Outlook for Lyondell, Equistar and Millennium was revised to Positive from Stable. For Lyondell, approximately $5.0 billion of debt is covered; for Equistar, approximately $2.2 billion of debt is covered; and for Millennium Chemicals, approximately $853 million of debt is covered by these actions.

The Positive Outlook reflects the likelihood that Lyondell will be able to accelerate its debt reduction efforts in the next 12-18 months. Additionally, supply/demand fundamentals continue to be favorable for most of Lyondell's products. Fitch also expects energy and raw material prices will continue to be volatile although these prices on average are expected to trend lower. Continued strong operations from petrochemical and refining operations are likely to offset other cyclical businesses within the portfolio.

The affirmation for Lyondell's debt ratings are supported by the recent announcement to sell its Inorganics business which should provide for accelerated debt repayment in the near term. Furthermore, the affirmation also considers Lyondell's better than expected cash generation and debt repayment during 2006. Multiple debt issues are accessible at Lyondell (parent), Equistar and Millennium. Fitch expects debt prepayment premiums and charges will be paid on certain issues instead of allowing cash to build and repay maturities as they come due. Fitch also expects debt reduction targets could potentially be met during 2008. Lastly, Lyondell's size, integrated businesses in refining, petrochemicals and performance products, liquidity and access to capital markets support the rating.

The affirmation and revised Rating Outlook to Positive from Stable for Millennium is supported by the expected benefit as a result of the Inorganics divestiture. The asset sale will likely accelerate debt reduction. Currently, Millennium cannot declare dividends to Lyondell due to certain restrictions in its existing bond indenture for the 9.25% senior unsecured notes. Fitch expects these 9.25% notes due June 2008 could potentially be repaid by the company to allow for future cash dividends to Lyondell by Millennium. Depending on debt levels at Millennium post the completion of the Inorganics sale, and the cash flow generation from remaining businesses to support such debt, the ratings could be raised in the next 12-18 months. Potential rating concerns include the Millennium's high dependency on Equistar cash distributions and any new negative developments regarding Millennium's ongoing lead paint litigation. At Dec. 31, 2006, Millennium had $1 billion in indemnity coverage for lead-based paint and lead pigment litigation.

The affirmation and revised Rating Outlook to Positive from Stable for Equistar is supported by the overall indirect, and possibly direct, benefit of the Inorganics divestiture. The asset sale could accelerate debt reduction and possibly reduce the need for Equistar to dividend existing cash to partners, and instead use available cash for debt reduction at Equistar. Additionally Equistar's ratings are limited by its parent Lyondell, and the Positive Rating Outlook also reflects the likelihood that Lyondell's ratings could be raised in the next 12-18 months. Equistar's ratings are limited by Lyondell due Lyondell's strong access to its cash flow, Equistar's primary focus on North American markets and its narrower product portfolio compared to Lyondell.

Lyondell holds leading global positions in propylene oxide and derivatives, plus TiO2, as well as leading North American positions in ethylene, propylene, polyethylene, aromatics, acetic acid, and vinyl acetate monomer. The company also has substantial refining operations located in Houston, TX. The company benefits from strong technology positions and barriers to entry in its major product lines. Lyondell owns 100% of Equistar; 70.5% directly and 29.5% indirectly through its wholly owned subsidiary Millennium. In 2006, Lyondell and subsidiaries generated $2.55 billion of EBITDA on $22.2 billion in sales.