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Rating Action:

Moody's assigns Baa2 rating to AGCO International Holdings B.V.'s. new senior notes

27 Sep 2021

New York, September 27, 2021 -- Moody's Investors Service (Moody's) assigned a Baa2 rating to AGCO International Holdings B.V.'s proposed senior unsecured Euro notes. The notes will be fully and unconditionally guaranteed by parent company AGCO Corporation (AGCO -- Baa2). The rating outlook is stable.

The proceeds from these notes are expected to be used to repay multiple senior term loans in a largely debt-neutral transaction.

Moody's took the following action on AGCO International Holdings B.V.:

Assignments:

..Issuer: AGCO International Holdings B.V.

....Gtd Senior Unsecured Regular Bond/Debenture, Assigned Baa2

Outlook Actions:

..Issuer: AGCO International Holdings B.V.

....Outlook, Assigned Stable

RATINGS RATIONALE

AGCO is one of four global farm equipment manufacturers along with Deere & Company, CNH Industrial N.V. and Kubota Corporation. Although the smallest by revenue, AGCO maintains a competitive position in the sector, with a particularly strong presence in Europe. The company has a track record of expanding margins and returns when markets are stable or growing, while also effectively managing costs in order to contain margin erosion during downturns. It has also executed a disciplined acquisition strategy that has been funded in a manner that has not compromised the strength of its balance sheet - Moody's expects any future acquisitions to remain consistent with this approach.

The precision farming sector will continue to expand as the need to feed a growing world population increases the need for more efficient farming technology. AGCO has made sound investments in this area, expanding revenue and remaining well-positioned to benefit from the sector's growing importance.

A critical element of AGCO's operating and financial strategy is the provision of retail and wholesale financing through a finance joint venture (JV) with Rabobank. The JV (49% owned by AGCO and 51% owned by Rabobank) has a portfolio of receivables of approximately $10.8 billion at June 30, 2021. By relying on the JV to provide retail and wholesale funding, AGCO is relieved of the funding and credit loss burden typically associated with a wholly owned captive finance operation. Importantly, we believe that this JV structure provides AGCO with a highly reliable source of funding for its customers and dealers.

The stable outlook reflects AGCO's competitive position within an industry that has favorable long-term demand fundamentals. It also recognizes the company's strategy of maintaining a prudent financial and liquidity position.

AGCO maintains good liquidity that is supported by a June 2021 cash position of $500 million, $540 million in availability under a bank credit facility and annual free cash flow that Moody's expects to approximate $400 million. These liquidity sources afford sound coverage of the approximately $375 million in debt maturing over the next twelve months.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING

AGCO's rating could be downgraded if the company adopts a more aggressive financial strategy resulting in debt-to-EBITDA exceeding 3x and the EBITA margin falling below 6%. The rating could be upgraded, over the long term, if AGCO can sustain an EBITA margin over 10% and debt-to-EBITDA below 1.75x.

AGCO Corporation is a leading manufacturer of agricultural equipment and related replacement parts. The company generated approximately $10.5 billion in revenue for the latest twelve months ended June 30, 2021. The company has access to wholesale and retail financing through finance joint ventures with Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank).

The principal methodology used in this rating was Manufacturing published in September 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287885. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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.

Eric Greaser
Vice President - Senior Analyst
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

Dean Diaz
Associate Managing Director
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.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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