MOODY'S CONFIRMS A3 DEBT RATINGS OF ERIDANIA BEGHIN-SAY AND GUARANTEED SUBSIDIARY
Paris, 9/3/1996 -- Moody's Investors Service confirmed the A3 senior debt ratings of Eridania B‚ghin-Say (EBS) and of its guaranteed subsidiary, American Maize-Products Company, now renamed Cerestar USA. Moody's also confirmed the Baa1 rating of the Industrial Revenue Bonds of American Maize-Products Company. The confirmation reflects the strategic value of EBS's acquisition of certain assets of Compagnie Fran‡aise de Sucrerie, and Moody's expectation that EBS will be able to restore its financial measurements, which the acquisition will cause to deteriorate. The confirmation is also based on our expectation that EBS will refrain from further large, debt-financed acquisitions, and that its operating performance will recover from its current weakness. The confirmation concludes a review initiated on June 5, 1996. The Prime-2 ratings for commercial paper of Eridania B‚ghin-Say and its guaranteed subsidiary Eridania B‚ghin-Say SA/NV were not under review and are confirmed.
The following ratings have been confirmed:
Eridania B‚ghin-Say: -- Eurobond, and Euro medium term note program, at A3,
American Maize-Products Company: -- guaranteed senior notes, at A3,
American Maize-Products Company: -- guaranteed industrial revenue bonds, at Baa1.
The confirmation of the Baa1 rating on the industrial revenue bonds issued by American Maize-Products Company is based on the guarantee ('caution') provided by EBS and the uncertainties surrounding the enforceability of the guarantee under U.S. law, as well as the nature of the rights of bondholders under it.
EBS recently acquired Compagnie Fran‡aise de Sucrerie (CFS), France's third-largest sugar producer, which it intends to split up in several parts, retaining approximately half of the assets and liabilities. This acquisition will consolidate EBS's leading competitive positions in the French and European sugar markets and is likely to allow economies of scale. In addition, the acquisition, which is reasonably priced, will enhance EBS's product mix, because French sugar operations are by far the group's most profitable and cash generative. Nevertheless, the transaction will result in higher debt levels, at a time when EBS faces a difficult operating environment.
Because of a rare combination of several factors, including substantial rises in the prices of corn and wheat, and mediocre crops of beet in Italy and of olives in Spain, EBS's operating margins are likely to be squeezed in 1996. Nevertheless, Moody's expects that these factors will not be recurring, and that EBS should regain stronger profitability over the intermediate term. As a result, cash flow generation should be restored, allowing a timely restoration of financial measurements. Moody's cautioned, however, that further debt-financed acquisitions could place negative pressure on the rating.
Based in Paris, France, Eridania B‚ghin-Say is a major processor of agricultural products, and had revenues of FF 50.8 billion in 1995.
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