Fitch Ratings has assigned a 'BBB' Issuer Default Rating (IDR) to The Mosaic Company (Mosaic) and a 'BBB' rating to Mosaic's senior unsecured debt, the revolving credit facility. Fitch has also affirmed the 'BBB' investment grade debt ratings and IDRs of MOS Holdings Inc. and its subsidiaries. The Rating Outlook is Stable.
The ratings reflect Mosaic's low leverage, healthy cash generation and favorable business prospects. Business conditions are currently solid, and what appears to be the third highest U.S. corn crop in 2011/12 looks to be another record year for Mosaic. Worldwide fertilizer use is increasing, and phosphate and potash shipments are on course to have their best or second best seasons. Prices for both have been climbing steadily since the recession and with them Mosaic's profits. Mosaic will likely beat the 12 million tonnes of phosphate and phosphate blend fertilizers and the 7.6 million tonnes of potash shipped in the last fiscal year, all at prices which are $100/tonne or so higher. Driving farm economics is a worldwide increase in the demand for feed and more locally an increase in the demand for corn-to-ethanol to meet higher Renewable Fuel Standards.
For fiscal 2012 Fitch estimates that Mosaic will earn around $3.7 billion in EBITDA, sizably better than the $3.1 billion earned last year. This considers some loss in margin owing to the hiatus at the company's South Ft. Meade mine as a result of a legal injunction which is being contested. Cash flow from operations is expected to approach $3 billion in fiscal 2012 with $1.5 billion falling into cash coffers after capital spending to increase Canadian potash mining capacity. Capital expenditures are forecasted at $1.6 billion. Mosaic's year-end cash balances are expected to grow to $5.5 billion, up from $4 billion at the close of this past first quarter at the end of August. Mosaic's total debt at the close of the first quarter was just over $825 million.
This past April Mosaic signed a $750 million unsecured revolver, available to both it and its subsidiary, MOS Holdings Inc. The revolver matures in 2016 and is guaranteed by MOS Holdings Inc. and certain operating subsidiaries. Principal financial tests include a minimum EBITDA/interest cover of 3.50 times (x) and a maximum debt/LTM EBITDA of 3.00x.
Mosaic's liquidity profile is further enhanced by low cash calls for future debt redemption. The company just repaid $27 million in revenue bonds last September and has a remaining $19 million of its 9.45% bonds maturing this coming December. In each of fiscal 2013 and 2014, $1.1 million comes due followed by $0.8 million in 2015 and $1.5 million in 2016.
The details of Fitch's rating actions follow:
The Mosaic Company (parent)
--IDR at 'BBB';
--Senior unsecured
guaranteed revolver at 'BBB'.
MOS Holdings Inc. (formerly The Mosaic Company, renamed)
--IDR
at'BBB';
--Senior unsecured notes at 'BBB'.
Mosaic Global Holdings
--IDR at 'BBB';
--Senior unsecured
notes at 'BBB'.
The Outlook is Stable.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating
Methodology', dated Aug. 12, 2011.
Applicable Criteria and Related Research:
Corporate Rating
Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
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