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Investing.com -- Fitch Ratings has downgraded Dow Inc. and Dow Chemical (NYSE:DOW) Company’s Long-Term Issuer Default Rating (IDR) to ’BBB’ from ’BBB+’ with a Stable outlook, the rating agency announced Thursday.
The downgrade reflects Dow’s sustained weak operating performance due to soft end-market demand, particularly in construction and automotive sectors, which has led to high leverage and negative free cash flow (FCF).
Fitch also downgraded Union Carbide Corporation’s IDR to ’BBB-’ from ’BBB’ and lowered Dow Chemical Company’s Short-Term IDR to ’F2’ from ’F1’.
The rating agency expects Dow’s EBITDA leverage to approach 4.0x in 2025 before recovering to approximately 3.0x by 2027. Despite Dow’s $1 billion annual dividend cut, the company is still projected to have negative FCF exceeding $2.6 billion for 2025, even after accounting for proceeds from the Diamond Infrastructure Solutions transaction.
Fitch anticipates that industry margins will remain under pressure from continued ethylene capacity additions that will likely outpace demand over the next five to six years. China’s supply additions, coinciding with slowing domestic demand, are contributing to the oversupply situation.
The ratings also acknowledge Dow’s significant scale and diversification across end markets and geographies. As one of the largest chemical producers globally and the largest in North America, Dow’s 2024 revenue was balanced across North America, EMEA, and other global markets.
Dow maintains strong liquidity with $2.4 billion in cash as of June 30, 2025, and access to $8.4 billion in committed and available credit facilities. Debt maturities through 2026 are modest, with the only major upcoming maturity of around $750 million occurring in 2027.
According to Fitch, factors that could lead to a further downgrade include EBITDA leverage durably above 3.0x or persistent negative FCF generation. Conversely, an upgrade could be triggered by EBITDA leverage sustained below 2.3x, consistent FCF margins above 1.5%, or EBITDA margins approaching 15%.
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