New York, December 05, 2012 -- Moody's Investors Service assigned a B2 Corporate Family Rating (CFR) to Sawgrass Merger Sub Inc. (Sawgrass) and a B3 rating to its senior secured notes due 2020. The proceeds of the bond issuance are intended to partially fund the acquisition of TPC Group Inc.(TPC) by private equity funds managed by First Reserve Management, L.P. and SK Capital Partners. As part of the acquisition Sawgrass will merge with TPC after the acquisition, with TPC being the surviving entity and the obligor under the notes indenture. The rating outlook is stable. Upon closing of the acquisition and repayment of the existing TPC debt, Moody's will withdraw all existing ratings for TPC Group LLC.

The following summarizes the ratings activity:

Rating assigned:

Sawgrass Merger Sub Inc.

Corporate Family Rating -- B2

Probability of Default Rating -- B2

$655mm Senior Secured Notes -- B3 (LGD4, 63%)

Outlook: Stable

Ratings affirmed and to be withdrawn:**

TPC Group LLC

Corporate Family Rating -- B1

Probability of Default Rating - B1

$350mm Senior Secured Notes due 2017 -- B1 (LGD4, 55%) from B1 (LGD4, 57%)

Outlook: Stable

**The existing corporate and issue ratings for TPC Group LLC will be withdrawn after the acquisition is completed and the existing debt is repaid.

RATINGS RATIONALE

Sawgrass's B2 CFR reflects the high leverage resulting from the leveraged buyout of TPC, and expectations TPC will borrow under its revolving credit facility to fund project capital expenditures in 2013, thereby resulting in negative free cash flow in the near-term. Additionally, it could pursue an on-purpose butadiene project that could defer positive free cash flow generation by the firm to 2015. The buyout, which values TPC at $904 million, or roughly 6.1x adjusted EBITDA will boost the company's leverage to 5.3x as of September 30, 2012 (debt to EBITDA, including Moody's standard analytical adjustments and pro forma adjustments for the LBO, butadiene price impacts and certain one-time transaction expenses disclosed by the company). The company plans to refurbish its dehydrogenation and MTBE facilities at its Houston plant at a cost of $265 million ($25 million has been spent through September 2012), to produce isobutylene from purchased isobutane feedstock, which TPC believes will be abundant and attractively priced as the supply of NGL's from shale natural gas production continues to increase. The project is expected to start production in the second half of 2014. TPC is also studying the possibility of producing on-purpose butadiene, but has not announced a decision to go forward with this project. While we believe the projects will improve TPC's business profile and profits, the capital spending could result in a multi-year period of minimal free cash flow for the firm and the second project might require external financing.

Sawgrass's CFR also reflects TPC's narrow commodity based product line, concentrated operational and geographical profile and modest EBITDA margins. The company enjoys large market shares within its niche product lines where it is either the largest or second largest supplier. Over 70% of its sales volumes are contractually insulated from fluctuations in feedstock, sales price and energy price fluctuations to protect margins. Despite the margin protection offered by its contracts, margins can be somewhat volatile because of carrying inventory from one month to the next while commodity prices fluctuate.

TPC is expected to have adequate liquidity supported by the new $250 million asset-backed revolving credit facility, an estimated $120 million of cash on hand at closing and cash flows from operations. The ABL revolver is subject to a borrowing base, and it is possible that the company will not have access to the full amount of commitments over the next year. It does not have maintenance financial covenants under its revolver so long as availability does not dip below a certain level.

The rating outlook is stable. It is unlikely that the CFR would be upgraded before the company completes its first major capital project. The ratings could be upgraded if leverage (Debt/EBITDA) declined below 4.0x on a sustained basis and the company produced positive free cash flow. Ratings could be downgraded if the company is unable to maintain its margins, Debt/EBITDA rose above 6x for a sustained period or it did not maintain adequate liquidity.

The principal methodology used in rating Sawgrass was the Global Chemical Industry Methodology published in December 2009. Other methodologies include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

TPC is a processor of crude C4 hydrocarbons (primarily butadiene, butene-1, isobutylene), differentiated isobutylene derivatives and nonene and tetramer. For its product lines, TPC is either the largest or second largest independent North American producer. The company operates three Texas-based manufacturing facilities in Houston, Baytown and Port Neches. Revenues were $2.4 billion for the twelve months ended September 30, 2012.

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James Wilkins Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Steven Wood MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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