) new $1 billion commercial paper program was assigned a Prime-2
rating by Moody's Investors Service. Moody's also affirmed
Agrium's existing senior unsecured ratings.
The proceeds from Agrium's $1 billion commercial paper program
are expected to be used for general corporate purposes. The
program will be supported by the company's $2.5 billion
multi-jurisdictional revolving credit facility, which will mature
in 2017. This credit facility has a $500 million swingline to
offer same-day availability for funds in New York.
Agrium anticipates a reasonable usage of the program of about
$200 million in the initial days, due to the seasonal nature of
its cash flows. The company's liquidity is likely to be disrupted
in 2014 and 2015 due to increased capital expenditure, rising
dividends and the possibility for further share repurchases under
its existing program.
Agrium's $2.5 billion revolving credit facility is adequate to
cover the commercial paper program which will remain well below
the $1 billion limit at any given time barring any acquisition
opportunities. Moody's also expects the company to manage the
commercial paper program such that the maximum daily maturities
range between $50 million to $200 million. Failure to maintain
these daily maturities below the $500 million swingline same-day
limit would pressure the Prime-2 rating.
Moody's Prime-2 rating to Agrium is based on its good
liquidity given consistent gross cash flow, moderate cash
balance, large availability in excess of $2 billion (as of Sept
30, 2013) under its backup facility and other revolving credit
facilities. The rating also reflects Agrium's diverse business
mix and its strong global retail presence along with an extensive
logistical network. Agrium's strong credit metrics including
Retained Cash Flow/Debt of 37.1%, EBITDA/Interest of 14.1x, and
Debt/EBITDA of 1.6x also contribute to the strong rating.
Moody's may also upgrade the rating on Agrium if it generates
Retained Cash Flow/Debt above 30% and maintains a Debt/EBITDA
which is no higher than 2x. However, Moody's could downgrade the
rating if the world agriculture markets decline, if Retained Cash
Flow/Debt drops below 20% or if Debt/EBITDA were to exceed 3x on
a sustained basis.
Agrium currently carries a Zacks Rank #3 (Hold).
Other companies in the fertilizer and related industries with
favorable Zacks Rank are
The Scotts Miracle-Gro Company
The Andersons, Inc.
). All of them retain a Zacks Rank #2 (Buy).
AGRIUM INC (AGU): Free Stock Analysis Report
ANDERSONS INC (ANDE): Free Stock Analysis
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SCOTTS MIRCL-GR (SMG): Free Stock Analysis
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