ICI prospects looking bleak

Despite posting a comparatively robust set of Q3 results, the chemicals giant is still handicapped by a £3 billion-plus debt burden. The planned divestment of ICI’s substantial interest in Hunstman International looks under threat, increasing the likelihood of a rating downgrade. To make matters worse, the spectre of litigation hanging over a US subsidiary is undermining investor confidence and contributing to a pessimistic outlook. Bear Stearns

Lack of cashflow and £3.1 billion net debt is not the best backdrop for a chemical company in the current economic environment. Nevertheless ICI managed to deliver an upbeat set of Q3 results last month, which highlighted the benefits of an improved portfolio mix over past years and greater dependence on more stable specialty and consumer businesses. But how safe are the Baa2-/BBB ratings?

ICI is not expected to generate any meaningful and sustainable cashflow until at least 2003, in