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Rating Action:

Moody's assigns A3 rating to Monsanto's senior notes

Global Credit Research - 26 Jun 2014

New York, June 26, 2014 -- Moody's Investors Service assigned A3 ratings to Monsanto Company's (Monsanto's) new $4.5 billion of senior unsecured notes. The company plans to issue seven tranches of notes ranging from 3 year to 50 year maturities for a total of up to $4.5 billion. On June 25, 2014, Monsanto announced a new $10 billion 2 year share repurchase authorization, $6 billion expected through an accelerated share repurchase program in the near-term. Proceeds from the new notes as well as a portion of Monsanto's cash balance will be used for the share repurchases. The rating outlook is stable.

Ratings Assigned:

Monsanto Company

.. $500 million Senior Unsecured Notes due 2017 at A3

.. $500 million Senior Unsecured Notes due 2019 at A3

.. $500 million Senior Unsecured Notes due 2021 at A3

.. $750 million Senior Unsecured Notes due 2024 at A3

.. $500 million Senior Unsecured Notes due 2034 at A3

.. $1,000 million Senior Unsecured Notes due 2044 at A3

.. $750 million Senior Unsecured Notes due 2064 at A3

Ratings Unchanged:

Monsanto Company

..Senior Unsecured Notes at A3

..Senior Unsecured Shelf at (P)A3

..Commercial Paper at P-2

Monsanto Finance Canada Co.

..Senior Unsecured Notes at A3

RATINGS RATIONALE

The A3 long-term debt ratings reflect Monsanto's new financial policy and continued strong financial performance from its leadership position in genetically modified (GM) and hybrid seeds. Management's new leverage target of Net Debt/EBITDA of 1.5x results in Moody's adjusted Net Debt/EBITDA closer to 2.0x and Retained Cash Flow/Net Debt of roughly 25%. Although these metrics are modestly weaker than other A3 chemical companies, Monsanto's size and market position in seeds offset its modestly weaker financial metrics. Monsanto is expected to increase debt to fund the accelerated share repurchase program in the near term and use a combination of additional debt and free cash flow to fund the remainder of the $10 billion program. The A3 rating assumes that management will adjust the pace of share repurchases once it reaches its new leverage target to reflect the seasonal generation of free cash flow and will not exceed its new leverage target due to share repurchases for any sustained period.

Monsanto's market position is supported by the largest germplasm library in the industry, technology licensing agreements with its main competitors and clearly defined research pipeline. The company is exposed to headline risk related to GMO crops, litigation, weed resistance to glyphosate herbicide and its market position. The A3 rating incorporates the expectation that Monsanto will continue to pursue sizable acquisitions to enhance its technology portfolio and market position. While the company is subject to large seasonal swings in working capital and free cash flow, it is expected to maintain a large cash balance, which will reduce seasonal variability in the amount of short term debt outstanding.

The company's commercial paper rating of Prime-2 reflects its long-term debt rating. This rating is expected to be supported by strong liquidity, which will be comprised of an elevated cash balance (varying from $1 to $3 billion), annual free cash flow of $1.0-1.5 billion and a $2.0 billion credit facility maturing in 2016. In addition, it has a $500 million US customer revolving financing program and $450 million of facilities for customer financing programs in Brazil. As of May 31, 2014, there were no commercial paper borrowings outstanding, no outstandings under the revolving credit facility, $4 million of receivables sold under the US customer financing facility and $11 million outstanding against the international customer-financing program. In addition, there are no meaningful maturities of long-term debt in 2014 or 2015.

The stable outlook reflects Moody's expectation that Monsanto will manage the pace of share repurchases, and its increase in debt, so that it does not exceed its new leverage target for any sustained period. To the extent that Monsanto increases its adjusted Debt/EBITDA to over 2.5x and Retained Cash Flow/Debt remains below 20% for a sustained period, Moody's could lower Monsanto's rating by one notch to Baa1. Conversely, if Monsanto changes its financial policy to keep adjusted Debt/EBITDA below 1.5x and Retained Cash Flow/Debt above 30%, Moody's would likely raise its rating by one notch to A2. Moody's adjustments add roughly $1.7 billion of debt due to the capitalization of operating leases ($1.55 billion) and pensions ($170 million).

The principal methodology used in this rating was the Global Chemical Industry Rating Methodology published in December 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in St. Louis, Missouri, Monsanto Company is a global producer of agricultural chemicals and genetically modified seeds. Revenues totaled over $15 billion for the last twelve months ending May 31, 2014. Monsanto's businesses are managed through two segments: Seeds & Genomics and Agricultural Productivity.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

John Rogers
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian B Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns A3 rating to Monsanto's senior notes
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