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22 Aug 1997
New York, 08-22-97 -- Moody's Investors Service said it confirmed the Aa3 rating on the senior unsecured debt at DuPont, but warned that the recent trend of acquisition activity increases the debt level to a point where the debt protection measures have become weak for the Aa3 rating category. Any additional transactions or other events that further stretch the financial profile are likely to lead to a downgrade of the long term ratings, Moody's added. MOODY'S CONFIRMS DUPONT'S RATINGS: SENIOR UNSECURED AT Aa3 THREATENED BY ACQUISITIONS AND HIGHER DEBT
The rating agency's comments follow the announcement earlier today by DuPont that it had signed a letter of intent to acquire Protein Technologies International (PTI) and related affiliates from Ralston Purina for $1.5 billion, which is expected to ultimately be financed mostly with additional borrowings. The acquisition of PTI comes on the heels of two other acquisitions: the purchase of ICI's polyester and titanium dioxide businesses for about $3.0 billion, roughly half of which is expected to close this year, and the acquisition of 20% of Pioneer Hi-Bred International for $1.7 billion.
The PTI transaction would increase DuPont's total debt to over $12.0 billion by year end, reducing retained cash flow-to-debt measures to the low 40% range and resulting in a weak financial profile for the rating category.
Moody's said that it believes the company's financial policies are an important determinant in the rating outlook. While the rating agency said it recognizes that acquisitions are vital to quickly build the requisite skills in life sciences, management's apparently more aggressive posture in pursuit of its portfolio strategies and the exclusive use of debt financing raises questions regarding the financial profile over the medium term.
Moody's noted that the PTI and Pioneer acquisitions are consistent with management's strategy to grow its life science businesses, including the strengthening of product development and production capabilities in agricultural products and further value creation downstream. These transactions also reflect dynamic industry conditions, which include the rapid pace of technology change, the emergence of transgenic seeds and crops, and an increasingly competitive environment in agricultural chemicals.
Headquartered in Wilmington, Delaware, DuPont's diversified chemicals and specialties operations comprise the world's fourth largest enterprise, which together with the integrated petrochemical business of Conoco, a wholly owned subsidiary, represents one of the largest US industrial corporations.
No Related Data.
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