Fitch Affirms FertiNitro Finance Secured Bonds At 'B-'; Off Watch Negative.

NEW YORK -- Fitch Ratings has affirmed and removed from Rating Watch Negative FertiNitro Finance Inc.'s (FertiNitro) 'B-' rated US$250 million 8.29% secured bonds due 2020.

The Negative Rating Watch addressed Fitch's concerns that a change in Venezuela's petrochemicals law would force FertiNitro to redirect portions of its fertilizer output from the world export markets to the Venezuelan market with sales subject to pricing dictated by the government. According to the offtake agreement between Petroquimica de Venezuela, S.A. (Pequiven) and FertiNitro, Pequiven is obligated to re-sell, on a gradually decreased percentage, its 50% share of the plant's production outside Venezuela at market prices. Fitch believes that the most recent amendment to the petrochemicals law (published in July) is not likely to cause project revenues to decrease substantially during the remainder of 2006 and in 2007. Nevertheless, significant uncertainty remains regarding additional modifications to and adverse interpretations of the fiscal, legal and regulatory framework that could potentially impair production and export revenue. Fitch will continue to monitor legislative and regulatory developments in Venezuela and take rating action as appropriate.

In May, the plant completed a 180-day Second Reliability Test, which had been deferred from 2003 with lender consent. The test is designed to demonstrate and ensure that the project has the ability to operate as initially represented to bondholders. Upon completion of the report of the independent engineer, the financial model will be re-run to indicate whether the project's debt sustaining capacity is in fact consistent with a minimum debt service coverage ratio of 2.25 times (x) and a life-to-loan coverage ratio of 3.00x. Through July, the project achieved the highest utilization rates since completion, with urea production reaching 101% of the Offering Circular target and ammonia 98%. FertiNitro's debt service margins are expected to average 1.71x in 2006.

In 2005, collections on sales rose 4.7% on stronger ammonia and urea prices. Higher prices in the global markets offset the reduced shipments that resulted from scheduled shutdowns of the urea and ammonia trains in the summer. Higher operating costs combined with the extinction of tax credits and loss carry-forwards, which resulted in tax payments of $21.5 million, decreased cash available for debt service in 2005 to $116 million from $146 million in 2004. Of note, ample accumulated cash balances enabled FertiNitro to pay $36.9 million of deferred bank loan principal in April 2005, ahead of schedule, in addition to the programmed semi-annual amortization payment of $21.7 million. A cumulative net draw of $8.3 million from the restricted cash account enabled FertiNitro to meet total debt service payments of $129.9 million in 2005.

FertiNitro ranks as one of the world's largest nitrogen-based fertilizer plants, with nameplate daily production capacity of 3,600 Metric Tons of ammonia and 4,400 Metric Tons of urea. It is owned 35% by a Koch Industries, Inc. subsidiary, 35% by Pequiven, a state-owned petrochemicals company, 20% by a Snamprogetti S.p.A. subsidiary, and 10% by a Cerveceria Polar, C.A. subsidiary.

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