Fitch Rates DuPont's Senior Unsecured Notes 'A'; Outlook Remains Negative

NEW YORK -- Fitch Ratings has assigned an 'A' rating to E.I. DuPont de Nemours and Company's (DuPont) issuance of $2 billion senior unsecured notes, split in a $1 billion 3.25% five-year tranche and a $1 billion 4.625% ten-year tranche. Net proceeds from the offering will be used to refinance upcoming debt maturities and for general corporate purposes.

Fitch's current ratings of DuPont are as follows:

--Issuer Default Rating (IDR) 'A';

--Bank credit facility 'A';

--Senior unsecured debt 'A';

--Commercial paper 'F1';

--Short-term IDR 'F1';

The Rating Outlook is Negative.

DuPont's ratings reflect the company's leading market positions, its integrated operations, its global reach and a well-diversified portfolio of products and brands. The company's leading competitive position and the more specialty and innovative nature of the portfolio tends to provide more stable cash flow than a commodity chemical producer. Albeit affected by the current recession and still weak economic demand, DuPont's financial strategy is conservative, which is emphasized by its low leverage relative to cash flow. Last 12 months (LTM) (to Sept. 30, 2009) funds from operations were in excess of 40% of gross balance sheet debt and net debt/operating EBITDA was 2.3 times (x). Even prior to the $2 billion notes issuances, liquidity remained strong at $5.9 billion, consisting of $2.2 billion cash on hand, $0.9 billion marketable securities and $2.8 billion availability under committed credit facilities with multi-year maturities as of Sept. 30, 2009. LTM free cash flow was approximately $0.5 billion after $1.6 billion capex and $1.5 billion dividends. Fitch expects LTM free cash flow to remain positive through the cycle. DuPont repaid $894 million notes in October. Proceeds from the $2 billion notes issuances cover the company's $0.9 billion maturity of its 4.125% notes in 2010 and most of its approximately $1.7 billion other short-term debt maturities including outstanding commercial paper. Medium-term maturities are very manageable with only $13 million coming due in 2011, $400 million in 2012 and $1.8 billion in 2013.

The Negative Outlook is based on the expectation that demand for chemical products from cyclical end-user markets such as automotives and construction will recover only slowly and gradually over the next several quarters. As a consequence, Fitch expects that DuPont's operating and financial performance will remain below the company's historical performance over the next several quarters. The downside risk is partly mitigated by restructuring initiatives taken by management which focus on fixed cost, working capital and capital expenditure reductions. The Negative Outlook also takes into account the anticipated loss of almost all of the estimated $1 billion in annual pharmaceutical royalties from the hypertension drug Cozaar/Hyzaar in 2009 after U.S. patent expiry in April 2010. DuPont projects that these royalties will decline to $300 million-$350 million next year and to $70 million in fiscal 2012. In the current economic environment, DuPont will find it significantly more difficult to replace the royalty stream with growth and profits from new and existing chemical and agricultural products.

DuPont is the second largest chemical company based on revenues, with leading market share in a number of specialty segments. Chemicals operations are highly integrated resulting in cost advantages across the business cycle. Going forward, DuPont will report its results in seven reporting segments, Agriculture & Nutrition, Electronics & Communications, Performance Coatings, Performance Materials, Safety & Protection, Performance Chemicals, and Pharmaceuticals.