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Rating Action:

Moody's assigns A3 to DuPont's new notes, outlook negative

26 Apr 2017

New York, April 26, 2017 -- Moody's Investors Service, ("Moody's") assigns A3 ratings to the new senior unsecured 3-year fixed and floating rate notes in total amount up to $2.0 billion issued at E. I. du Pont de Nemours and Company (DuPont). Proceeds of the notes are expected to be used for discretionary contributions to DuPont's U.S. defined benefit pension plan. The Notes will rank pari passu with all other unsecured debt of DuPont and will be obligations of DuPont only and will not be guaranteed by, or become obligations of, DowDuPont, The Dow Chemical Company or any of Dow's subsidiaries. The bonds will have a mandatory redemption triggered at the separation of the DowDuPont agricultural chemicals and seeds business (AgCo) or the Specialty Products business (SpecialtyCo) but will not be triggered by the separation of the Performance Materials business (MaterialCo). The outlook on the ratings remains negative.

The following rating actions were taken:

Issuer: E.I. du Pont de Nemours and Company

Assignments:

....$1000M Senior Unsecured Floating Rate Notes, Assigned A3

....$1000M Senior Unsecured Notes, Assigned A3

RATING RATIONALE

Moody's views this as a credit neutral event, as unfunded pension liabilities are being replaced in the capital structure with funded debt, leaving total adjusted debt roughly unchanged. However, Moody's recognizes the tax efficiency aspects of the action as well as the enhanced flexibility of capital structure planning associated with the eventual separation and independence of the three spincos.

The current A3 rating and negative outlook positions future adjustments in what we believe will be the higher probability range of A3 to strong-or mid-Baa. Moody's reiterates its approach of rating to the spinco entity that will be supporting the DuPont bonds after the split. We expect AgCo to be the entity supporting the DuPont bonds, but regardless of the entity, DuPont will be a smaller less diversified company on a post-spin basis. Also, execution risk during the merger phase is meaningful due to the complexities of combining, restructuring and realizing synergies within an entity that will have over $70 billion in combined revenues.

In addition, details with respect to each entity's balance sheet, pension liabilities and financial policies are still undefined, although DuPont maintains in its filings that the Ag spinco is intended to have credit metrics and a credit profile consistent with DuPont as of December 31, 2015; Specialty Products, meanwhile, is meant to have a investment-grade credit profile. On a positive note, Ag and Specialty will achieve better scale and significant cost synergies on a post-spin basis.

We view DuPont's liquidity profile as excellent and supportive of its Prime-2 rating for commercial paper. The company's primary liquidity is provided by a combination of $6.0 billion in cash and marketable securities as of December 31, 2016, cash flow from operations ($3.3 billion for the twelve months ended December 31, 2016, excluding Moody's standard analytical adjustments) and $7.9 billion in unused committed credit lines which includes the new unsecured term loan.

In March 2016, the company entered into a new credit agreement for a three-year $4.5 Billion senior unsecured delayed draw term loan of which only $500 million has been drawn. The facility, which can be drawn up to seven times a year, will be used for the company's general corporate purposes including debt repayment, working capital and share repurchases.

The negative outlook reflects the lack of details regarding the legal structure post-merger and the financial policies and balance sheet targets on a post-split basis. The negative outlook also reflects the fact that that DuPont's metrics are currently weak for the A3 category, as well as the complexities of combining and restructuring the agriculture and specialty businesses, which come at a time when their respective industries face industry or macro headwinds.

Factors that Could Lead to a Downgrade include missteps in the consolidation of the Dow and DuPont businesses in total or with respect to the Ag or Specialty Products segments; emergence of details that indicate that the DuPont bonds will become part of Specialty Products as opposed to the Ag spinco; emergence of details that indicate financial policies or balance sheet targets for the Ag spinco would not be supportive of A3 ratings on a post-split basis; intensified or extended weakness in the Ag markets; or negative surprises with respect to the antitrust review of the merger.

The possibility for upward ratings action is minimal for the foreseeable future, unless credit metrics improve significantly, or details emerge regarding which post-spin entity will service the bonds and the balance sheet targeted structure on a post-split basis

Headquartered in Wilmington, Delaware, E.I. du Pont de Nemours and Company (DuPont) is one of the largest US and global chemical companies with a diverse portfolio of specialty materials, chemicals, polymers and agricultural products. The company reported $25 billion of revenues for the twelve months ending December 31, 2016.

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

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Joseph Princiotta
VP-Sr Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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