Fitch Ratings Affirms PolyOne at 'B'; Outlook Stable.

CHICAGO -- Fitch Ratings has affirmed PolyOne Corporation's (PolyOne) issuer default rating at 'B'; upgraded the rating on the senior unsecured debt; and withdrawn the rating on the senior secured credit facility. The Rating Outlook is Stable. The ratings are as follows.

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

--Senior secured credit facility 'BB/RR1' withdrawn;

--Senior unsecured notes and debentures: upgraded to 'B+/RR3' from 'B/RR4'.

The ratings continue to reflect PolyOne's downstream position as a leading plastics compounder and North American distributor; low operating margins; high debt level; and cyclical earnings.

PolyOne's operating performance continued to improve in 2005 and through the first half of 2006. In the current environment, raw material resin pricing has stabilized at high levels and PolyOne has been able to catch up with its own price increases, supported by good demand. Distributions from equity affiliates continue to be an important source of cash flow for the company. For the latest 12 months (LTM) period ended June 30, 2006, PolyOne's operating EBITDA improved to $158 million from $119 million at year-end 2005. Operating EBITDA margin has also improved to 6.0% from 4.9% at year-end 2005, but remains in the single-digit range. Meanwhile, total debt (including A/R securitization) declined to $628 million from $654 million at the end of 2005. Higher earnings and lower debt have strengthened credit statistics with total adjusted debt/operating EBITDAR of 4.4 times (x) and operating EBITDA/gross interest expense of 2.1x. These credit statistics compare favorably to leverage of 5.9x and coverage of 1.5x at year-end 2005.

The withdrawal of the $30 million senior secured credit facility rating stems from the expiration of that facility with no replacement. The upgrade of the senior unsecured debt rating to 'B+/RR3' reflects an increase in principal recovery related to the expiration of the senior secured credit facility.

The Stable Rating Outlook incorporates some additional improvement in earnings and profitability with modest, if any, debt reduction over the next 12 months. The Stable Outlook assumes demand is stable; any necessary price increases can be passed through; and costs moderate slightly. Other than the medium-term notes maturing each year, Fitch does not anticipate significant debt reduction in the near term. PolyOne has stated its desire to retire the 2010 notes on their call date in May 2007.

PolyOne, headquartered in Avon Lake, Ohio, is the largest compounder of plastics and a leading distributor of plastic resins in North America. PolyOne had revenues of approximately $2.7 billion and operating EBITDA of $157.7 million for the LTM period ended June 30, 2006.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.