BANKS MAY CAP DOW'S CREDIT 25 PERCENT BELOW USUAL LIMIT

BANKS MAY CAP DOW'S CREDIT 25 PERCENT BELOW USUAL LIMIT

Dow Corning's bank credit will be capped at a lower than usual limit if the company's legal costs, tied to its silicone breast implants, continue to mount, according to a banking official.

The banks, led by Swiss Bank Corp., could cut the size of the credit to $300 million from $400 million.At the same time, skittish investors are compelling Dow Corning to phase out borrowing in the short-term commercial paper market.

Commercial paper, a form of corporate IOU, is "an unreliable market for us; buyers don't like uncertainty," said Edward Steinhoff, Dow Corning's chief financial officer.

However, Dow Corning isn't facing a credit crunch, despite the tough bank terms and Dow Corning's retreat from the commercial paper market, Dow officials have said.

The company has asserted it has $250 million in insurance coverage, which is more than adequate to cover expected legal costs tied to silicone implants, which the company has been selling since 1964.