Fitch Upgrades Kerr-McGee's IDR to 'BB'; Outlook Remains Positive.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has raised the issuer default rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) of Kerr-McGee Corporation to 'BB' from 'BB-' and assigned a rating of 'BB' to the company's new $1.25 billion senior unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. credit facility. Fitch fitch: see polecat. has also assigned the senior unsecured rating of 'BB' to the company's $2.6 billion of public notes (excluding the $550 million of debt at Tronox Inc.), which became unsecured with the new credit facility. With the removal of the security, Fitch is withdrawing Kerr-McGee's secured rating of 'BB'. Fitch is also withdrawing the company's commercial paper rating of 'B', which has been inactive in·ac·tive adj. 1. Not active or tending to be active. 2. a. Not functioning or operating; out of use: inactive machinery. b. since the company's ratings were downgraded below investment grade in 2005. The Rating Outlook remains Positive. The debt ratings of Kerr-McGee are as follows: --IDR upgraded to 'BB' from 'BB-'; --Senior unsecured credit facility assigned 'BB'; --Senior unsecured notes assigned 'BB' (formerly senior secured notes); --Senior secured rating and commercial paper rating withdrawn. Fitch also rates the debt of the Tronox Inc. (Tronox) subsidiaries as follows: --Tronox IDR 'B'; --Tronox Worldwide LLC's and Tronox Finance's $350 million senior unsecured notes 'B+/RR3'; --Tronox $250 million senior secured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and $200 million senior secured term loan rating of 'BB/RR1'. The Rating Outlook for Tronox is Stable. The rating action reflects the continued improvement in the credit profile of Kerr-McGee as the company continues to reduce its balance sheet debt through the proceeds from asset sales. The company has completed all of the major divestments with the exception of the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east shelf properties. Bids for the shelf properties were received in late 2005 with a sale expected in the first quarter of 2006. With the announcement of the tender offer for the company's 7% debentures due 2011, the expected distribution of Tronox in 2006 and the maturity of the $300 million of 5.875% notes in September 2006, balance sheet debt is expected to be down to $2.1 billion at year-end 2006. Kerr-McGee's credit profile will also continue to benefit from the strong commodity price environment, the significant hedges in place through 2007 at prices well above historical levels, the 90% reduction in dividend payments, as well as the size and diversity of its reserve base. Fitch also expects Kerr-McGee to significantly reduce its environmental exposure with the distribution of Tronox. The rating action also takes into consideration the initiation of a $1 billion share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program with the target of reducing outstanding shares by 9% or approximately 10 million shares. Fitch expects Kerr-McGee will fund the program, as well as the tender of the 2011 debentures, with the significant level of cash on hand following the asset sales as well as free cash flow generation. The new program follows the 'Dutch Auction' tender in 2005, in which the company sold a significant portion of its assets, including approximately 30% of year-end 2004 reserves, to buy back approximately $4.0 billion of stock. The ratings also continue to reflect the abrupt change to the company's financial and operational strategy in 2005. The positive outlook reflects the rapid improvement in the company's credit metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. towards investment grade levels. Fitch will continue to review Kerr-McGee over the next several months to evaluate the company's results following the asset sales. The transition in the company has dramatically changed the company's asset base and production profile. Fitch's forecasts, however, reflect strong performance for Kerr-McGee, particularly given the hedges the company has in place and the reduction in the dividend. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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