CHICAGO--July 3, 2001--Fitch has affirmed its 'F2' rating of UOP LLC's (UOP) commercial paper program. UOP continues to generate positive free cash flows through a cyclical low, supported by strong market positions in the license of oil refining and petrochemical process technology. The Rating Outlook is Stable.

UOP's credit-protection measures have weakened considerably from the cyclically high levels that preceded the 1998 Asian crisis. Before the impact of a one-time charge described below, year 2000 EBITDA-to-interest declined to just under 5.0 times (x), while debt-to-EBITDA increased to approximately 3.0x. The deterioration in credit-protection measures seen over the last two years is attributable to a decline in high-margin revenues associated with licensing petrochemical processes and a decline in refining licensing and product sales. UOP continues to benefit from its highly profitable licensing cash flow base, proprietary products and strong market positions, which are balanced with the cyclicality of the refining and petrochemical industries and UOP's high use of debt in its capital structure. Since the beginning of 1998, UOP has paid out $375 million in distributions to its owners. This fact, combined with a decline in earnings, has contributed to historically high debt-to-total capitalization levels.

UOP has historically shown the ability to maintain a stable financial position with strong cash flows and high interest coverage ratios through the refining and petrochemical cycles. However, in the fourth quarter of 2000, UOP took a $62 million charge, which included a $54 million cash charge for warranty-related items. The remaining cash impact of the warranty-related charge will be $37.5 million in 2001. The cash impact of the charge was offset by a successful receivables reduction initiative, which allowed UOP to generate more than $66 million in cash from working capital accounts. The relatively large charge against earnings, in the context of cyclically weak operating income, required that UOP obtain a covenant compliance waiver from creditors through the end of 2001. UOP also suspended 2001 distributions to owners Dow Chemical (rated 'A+' and 'F1' by Fitch) and Honeywell (rated 'A+' and 'F1' by Fitch).

Operationally, UOP's strategy to expand its business by leveraging its existing technologies, developing new technologies and capitalizing on market changes continues to result in adequate financial performance through the current downturn. In 2000, UOP's results reflected residual weakness as a result of the slowdown in Asia and low energy prices, both of which marked 1998 as the start of the weak portion of the petrochemical and refining construction cycle. UOP's financial results typically exhibit a two-year lag relative to the onset of new projects. In 2001, operating performance should be similarly weak; however, the suspension of distribution payments should allow debt reduction to continue. Looking ahead, some signs of renewed project activity have been evident, suggesting that a 2003 or 2004 recovery to peak financial performance is possible for UOP.

International operations remain a focal point of the company's growth strategy due to the demand to upgrade and modernize refinery and petrochemical capabilities in the Far East and former Soviet Union. However, project delays, an overcapacity situation in the aromatics sector and increased global competition have continued to negatively impact UOP's financial results. Long-term international demand fundamentals remain positive and UOP is well-positioned to benefit from future capacity expansions. This is especially true for aromatics and other petrochemicals but perhaps less true for selected mature petroleum-refining technology segments, in which UOP has faced increased competition.

UOP is a leading international supplier of catalysts, adsorbents, engineered systems, technology and consulting services to the petrochemical and petroleum industries. UOP is also a leading worldwide producer and supplier of adsorbent molecular sieves with numerous applications. UOP LLC is a limited-liability company-owned by ASI Specialty Chemicals LLC, a subsidiary of Honeywell International (formerly AlliedSignal Inc.) and Catalysts, Adsorbents, and Process Systems Inc., a subsidiary of Dow Chemical.