Form 20-F 2005

Liquidity and Capital Resources
Rhodia debt refinancing
As a result of our refinancing and the new resources raised since the start of the year (capital increase of €604 million, syndicated
credit facility for €300 million, High Yield Notes for a principal amount of €500 million and a new North American asset securitization
agreement for €100 million), we believe that we can meet our liquidity requirements until the maturity of the syndicated credit facility
in June 2008.
Nevertheless, we will continue to have substantial medium-term liquidity requirements that can only be met with external financing.
Our syndicated credit facility will expire in June 2008, and High Yield Notes with a carrying value as of December 31, 2005 of
€1,345 million will mature in June 2010.
Our capacity to repay and/or refinance our debts at maturity will depend on our ability to generate positive operating cash flows
and on certain key external factors (the prices of raw materials and exchange and interest rates) that may significantly influence
our financial and operating situation. See Note 26 to the Consolidated Financial Statements.
Capital increase
In December 2005, we issued 549,134,383 new shares with preferential subscription rights for a gross amount of €604 million.
The preferential subscription rights enabled Rhodia shareholders to subscribe to seven new shares for eight existing shares at a
price of €1.10 per share.
Revolving credit facility
On June 17, 2005, we entered into a new syndicated credit facility with a limited number of lending banks for €300 million
(“Multicurrency Revolving Credit and Guaranty Facility” or “RCF”) maturing on June 30, 2008. This new syndicated credit facility
replaces the RFA (“Refinancing Facilities Agreement” or “RFA”). The interest rate applied to the borrowed sums corresponds to
the bank discount rate according to the currency of the borrowing plus the applicable margin. The applicable margin decreases
progressively based on an improvement in the net consolidated indebtedness/adjusted EBITDA ratio. In addition, we pay a
commitment commission corresponding to 45% of the applicable margin. The syndicated credit facility has been established for
the benefit of Rhodia and certain of its subsidiaries, including Rhodia Inc., and is guaranteed by Rhodia. It is usable in the form of
bank loans and/or guarantees.
Rhodia and Rhodia Inc. granted security interests in connection with the implementation of the RCF. Under the terms of an agreement
concluded between the lending banks and other secured creditors, the lending banks of the RCF and the other banks share the
proceeds from the call of any security. This agreement governs the relationship between the secured creditors concerning the
process of settling collateral security and the resulting sharing of the proceeds.
Under the terms of a subordination agreement, we agreed to subordinate the repayment of certain debts of our subsidiaries to the
repayment of the secured creditors. We will continue to repay subsidiaries’ debts according to their due dates as long as there is
no default in relation to our financial covenants.
The RCF contains clauses that require us to comply with certain financial ratios, early repayment clauses and mandatory repayment
clauses. These obligations are described in Note 26.1 to the Consolidated Financial Statements. At and prior to December 31,
2005, we have complied with all applicable financial covenants.
Form 20 - F 2005 - Rhodia
51