Fitch Assigns `BB-' Foreign Currency Rating To OPP Quimica.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 31, 2001

Fitch, the international rating agency, has assigned a senior unsecured foreign currency rating of 'BB-' to OPP Quimica S.A. (OPP). Fitch also assigned the company a local currency rating of 'BB-'. Fitch perceives OPP's Rating Outlook as Stable. In conjunction with these actions, Fitch has assigned a 'BB-' rating to OPP Finance Ltd.'s proposed $200 million global notes due 2006. The Rating Outlook on this rating is also Stable. OPP Petroquimica S.A. is OPP Quimica's principal predecessor.

The ratings are supported by OPP's leading market positions in the Brazilian and Latin American polyolefin and polyvinyl chloride (PVC) markets, partially integrated operations, successful cost reduction efforts, emphasis on core business activities, attractive domestic industry fundamentals and proven access to international capital markets. The ratings are tempered by the volatile nature of the commodity chemical markets, high leverage levels with significant US dollar exposure, cyclical sensitivity of end markets, domestic market concentration, tightening environmental regulations and uncertain domestic industry transformation.

The positive impact of stabilizing credit markets, improving sector fundamentals, strong GDP expansion, completion of additional installed production capacity and debt reduction efforts are reflected in OPP's first half 2000 results. A 78% increase in net sales, coupled with a 70% reduction in interest expense, strengthened EBITDA interest coverage to 2.1 times (x) from 0.6x as of June 1999.

Despite improved credit protection measures, OPP's consolidated balance sheet continues to hold significant US dollar-denominated obligations, underscoring a natural mismatch with the firm's reais-denominated revenues and exposure to refinancing and devaluation risks. These are partially mitigated through structured hedging operations designed to cover at least 50% of the company's scheduled US dollar-denominated disbursements during the ensuing 12- month period.

The group's credit profile will continue to be impacted by the cyclical nature of the commodity chemical industry and Brazilian macroeconomic performance. In 1999, the company's financial flexibility was adversely affected by the combination of the devaluation of the nation's currency, a sharp increase in domestic interest rates, weak global industry fundamentals and sluggish aggregate demand.

Odebrecht Quimica (Odequi), OPP's parent company, is in the process of restructuring its chemical and petrochemical holdings. The endeavor seeks to focus operations among established core businesses, namely, polyethylene (PE), polypropylene (PP), PVC, caustic soda and ethylene dichloride. The reorganization is also expected to yield significant long term tax benefits. As part of this process, Trikem S.A. (rated 'BB-' by Fitch) has become a direct subsidiary of OPP; 80% of the company's specialized compounds business has been divested; and Odequi terminated its cross equity participation with Unipar, giving the Odebrecht Group complete ownership over OPP.

Fitch believes that proposed asset sales associated with the restructuring will facilitate debt reduction efforts and strengthen credit protection measures. Following the reorganization, OPP will enjoy considerable competitive advantages, including partial feedstock integration, dominant market positions, significant economies of scale and advanced technologies. These factors should contribute to improved cash flow generation capabilities.

OPP is Latin America's leading producer of polyolefins. The concern is a wholly owned subsidiary of Odebrecht Quimica S.A. (Odequi). As of June 2000, OPP's annual PE installed capacity totaled 840,000 metric tons and PP 550,000 metric tons. The concern manufactures a broad range of resins for use in consumer and industrial applications, including plastic films for food and non-food packaging, bottles, shopping bags, consumer goods containers, automobile parts and household appliances. OPP holds a leading Mercosur market share in five of the six products it manufactures. Domestically, the firm has a 35% and 50% share of PE and PP markets, respectively. This leadership has allowed OPP to maintain price-setting positions for these products. Through jointly controlling equity stakes in two of the three national naphtha crackers, COPESUL and COPENE, the company enjoys backward integration for all of its feedstock requirements.

In November 2000, Trikem became a direct subsidiary of OPP. The former is engaged in the production and marketing of PVC for both the Brazilian and export markets. Based on 1999 gross sales of approximately $610 million, Trikem is the largest PVC producer in Brazil and Latin America with market shares of 63% and 40%, respectively. The company owns and operates three production complexes in Brazil, which in addition to producing PVC also manufacture and sell chlorine, ethylene dichloride and caustic soda. The company enjoys partially integrated operations with full backward chlorine integration.