NOT AN ANALYST

Company Overview Chemtura Corp is a manufacturer and marketer of specialty chemical products, most of which sold to industrial manufacturing customers for use as additives, ingredients or intermediates that add value to their end products. The Company operates on a global scale with 52% of last year sales coming from outside the United States.

Path to Bankruptcy In the 4Q of 2008, Chemtura experienced an unprecedented reduction in orders as the global recession deepened. Liquidity also deteriorated as the availability of financing under the European Receivable Facility decreased significantly due to the Company’s weak financial performance and it was eventually terminated in the 2Q of 2009. On January 2009, the US Facility was formed for the purpose of selling receivables and restoring most of the liquidity that was available in the previous quarter. However, sales and the overall financial performance deteriorated further in the first part of 2009, resulting in the company’s inability to be in compliance with two maintenance covenants under its Amended and Restated 2007 Credit Facility. On December 2008, the Company obtained a 90-day waiver of compliance with the covenants from the lenders under the 2007 Credit Facility. When Chemtura realized that it wasn’t able to refinance its 370 mm notes due in July 15, it filed for bankruptcy on March 18 2009. Foreign subsidiaries and certain US subsidiaries were not included in the filings. The Company is expected to file a plan of reorganization by February 15 2010, after the court already granted two extensions.

Capital Structure As of petition date, there are 1,020 mm of unsecured debt and 199 mm of secured debt, for a total of 1,229 mm.

Advances under the 2007 Credit Facility were originally set to 300 mm, but after it was amended on December 30 2008, the maximum allowed was reduced to 190 mm. The 2009 Notes (GLK.GA) are obligations of Great Lakes Chemical Corp, a wholly owned subsidiary of Chemtura Corp. The 2016 Notes (HTRA.GA) are obligations of certain domestic subsidiaries of Chemtura Corp, but may be released from their subsidiary guarantees under certain circumstances (exhibit 10.1 10Q filing on May 10 2006). The 2026 Debentures (CK.GE) are obligations of Chemtura Corp, the parent company, and therefore junior compared to the other notes.  The 2009 US Facility was terminated on March 23 as a condition of the debtor entering into 400 mm DIP Lending Agreement.  All receivables were sold back to the Company by purchasers for the amount of 117 mm. The CFO for 2009 already contains that charge.

Valuation For the nine months ending in September 30, the Company accumulated 169 mm in EBITDA and it will earn approximately 210 mm for the entire year. During Chemtura’s peak cycle 2005-2007, EBITDA ranged from 350 mm to 400 mm, which is not possible in this environment as demand remains weak, therefore I expect EBITDA for 2010 to be 210 mm on the conservative side, and 20% higher to 250 mm on the aggressive side. EV is calculated with a 4.5 multiple, which is conservative considering that the company never traded around these levels, but rivals like DOW and DD, traded around 5.2 and 6.2 during their peak cycles in 2005-2007. For the nine months ending in September 2009, CFO was 26 mm and it will be approximately 50 mm for the year with 60 mm in capex. For 2010, I expect the company to generate 60 mm in CFO with 90 mm in capex. Historically, capex has been around 110 mm a year with a CFO of 150 mm in 2007 and 250 mm in 2006. Keep in mind that results before 2005 are not directly comparable to more recent results due to the inclusion of operating results of Great Lakes, subsequent to the merger on July 2005.

Recovery Analysis Unsecured debt holders, excluding the 2026 Debentures, are getting 100 cents on the dollar if EV is higher then 1,035 mm in 2010. In fact, the 2009 and 2016 Notes are now trading around 107 cents on the dollar and 2026 Debentures are trading around 78 cents on the dollar, which implies that investors are expecting an EV on the high end of my valuation, around 245-250 mm. There seems to be no equity value left after restructuring at this moment, but if the company earns more then 210 mm in EBITDA for 2009 and expects to earn mote then 270 mm in EBITDA for 2010, I would be a buyer of the 2026 Debentures and the equity as well, which is now trading at 70 cents under CEMJQ.