Fitch Assigns 'BBB-' Rating to Lubrizol's Sr Unsec Debt.

CHICAGO -- Fitch Ratings has assigned a 'BBB-' rating to The Lubrizol Corporation's (Lubrizol) senior unsecured debt. The rating applies to Lubrizol's senior unsecured credit facility and its senior unsecured notes and debentures. The Rating Outlook is Stable. Fitch initiated ratings on Lubrizol as a service to users of Fitch's ratings; the ratings are based on public information.

Lubrizol's ratings incorporate its diverse mix of businesses, the market position of its products, cash generation ability, and high debt level. Lubrizol's business portfolio consists of a strong lubricant additives business; specialty chemicals for consumer products and performance coatings; and specialty materials. Certain businesses, such as the engine additives business and the Carbopol product line, have strong market positions. Many of the businesses in Lubrizol's portfolio are specialty in nature and can provide relatively stable margins compared with pure commodity chemical businesses. Despite relative stability, Lubrizol's margins are affected by higher raw material costs. Margin improvement is a key issue in the ongoing high raw material environment. Lubrizol's businesses have generated consistent cash flow, although slightly weaker during the economic downturn. Fitch estimates cash from operations were at $300 million pro forma in 2003. Fitch expects Lubrizol's cash from operations to exceed $300 million in 2005. Lubrizol's debt level is relatively high at $2.1 billion on Sept. 30, 2004.

The Stable Rating Outlook reflects the likelihood that debt reduction and earnings growth will support the ratings in the next 12-18 months. Fitch expects Lubrizol to earn between $500 million and $600 million in EBITDA in 2005. Economics are improving and Noveon International's (Noveon) earnings contribution will be fully incorporated in 2005. Moreover, Fitch expects cash flow to support moderate debt reduction over time.

Lubrizol's mix of businesses and its capital structure changed significantly with its June 2004 acquisition of Noveon. The Noveon acquisition increased the size of its personal care, coatings, and inks additives businesses. In addition, Noveon provided other specialty products such as Temprite chlorinated polyvinyl chloride and Estane thermoplastic polyurethanes. Fitch expects the diversification of products and earnings to benefit Lubrizol by providing growth opportunities.

Lubrizol is a specialty chemicals producer based in Wickliffe, Ohio. Lubrizol is a top producer of lubricant and fuel additives. Its diverse product portfolio includes Carbopol acrylic thickener, Temprite chlorinated polyvinylchloride, Estane thermoplastic polyurethane, and Hycar reactive liquid polymer. Its 2003 sales and EBITDA are estimated at $3.2 billion and $447.3 million, respectively, pro forma for the acquisition of Noveon International.