Dow Chemical to offer debt securities to cut debt, payoff preferred shareholders

Dow Chemical to offer debt securities to cut debt

NEW YORK — Dow Chemical Co. announced a plan Friday to retire preferred shares used for its recent buyout of Rohm & Haas, a move that will save it millions in dividend payments.

The Midland, Mich.-based company will offer about $6 billion in debt securities, some of which will be swapped with preferred stock held by two parties that helped the $16.5 billion buyout of Rohm go through last month.

“This is further evidence of the company’s commitment to financial flexibility and maintaining an investment-grade rating,” Chairman and Chief Executive Andrew Liveris said in a statement.

The move is substantial because the preferred shares paid an unusually high dividend of about 15 percent, and paying them off as quickly as possible was one way for Dow to save cash.

Fitch Ratings gave the debt securities offering a “BBB” rating after the offering was announced, two notches above junk status.

However, Fitch kept a “Negative” outlook, meaning the rating could be downgraded. The outlook “reflects the fact that the company’s profitability continues to be under pressure from the consequences of the economic downturn,” the ratings agency said in a statement.

Dow plans to use proceeds from the offering to pay down part of a $9.2 billion loan used to buy Rohm.

The company offered $1.63 billion in common stock earlier in the week, and found that there was more interest in buying the shares than they anticipated.

Dow plans to use proceeds from that offering to also pay down debt and buy out preferred shares.

Shares of Dow rose $1.12, or 7.1 percent, to $16.87 in afternoon trading. The stock has traded between $5.89 and $43.42 in the past 52 weeks.