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Rating Action:

Moody's assigns Baa3 rating to Bunge's new notes

07 May 2021

New York, May 07, 2021 -- Moody's Investors Service, ("Moody's") has assigned a Baa3 rating to Bunge Limited Finance Corp.'s guaranteed senior unsecured notes due 2031. Bunge Limited Finance Corp. is a wholly-owned subsidiary of Bunge Limited and these notes are fully, unconditionally, and irrevocably guaranteed by Bunge Limited. Proceeds are expected to be used for general corporate purposes, primarily the reduction of short-term debt. The rating outlook is stable.

"The large run-up in crop prices has substantially increased working capital requirements over the past year and led to elevated levels of short term debt; Bunge is terming out some of its short term debt, which will improve liquidity and extend its maturity profile" stated John Rogers, Senior Vice President at Moody's Investors Service, and lead analyst on Bunge.

Assignments:

..Issuer: Bunge Limited Finance Corp.

....Gtd Senior Unsecured Debt due 2031, Baa3

RATINGS RATIONALE

Bunge's Baa3 long-term debt rating is supported by its relatively conservative balance sheet (as measured by net working capital-to-net balance sheet debt) offset by significant variability in operating performance over the past several years. Despite the coronavirus pandemic, crop prices improved significantly in 2020 due to a number of factors including a significant increase in purchases by China and modestly lower than anticipated crop yields. Higher crop prices have also led to increasing crop monetization of farm inventories and a substantial increase in inventories at Bunge. As expected, higher crop prices have led to stronger financial performance at Bunge. Its first quarter 2021 performance was unusually strong, aided by $245 million of non-cash market-to-market gains and a $170 million gain on asset sales. Even excluding extraordinary items, Moody's does expect Bunge's 2021 performance to be near record levels for the company. Hence, Moody's expects credit metrics to remain below 2.5x and Retained Cash Flow/Net Debt remaining near or above 30% through the remainder of the year.

While year-to-year volatility in EBITDA is expected due to the inherent variability in harvests and crop prices, Bunge's LTM credit metrics are unusually strong due to large non-cash market to market gains in the first quarter of 2021 and the second quarter of 2020. At March 31, 2021, Net Debt/EBITDA is below 2.0x and Retained Cash Flow/Net Debt is over 30%.

Bunge's Agribusiness has performed well compared to competitors and the company's margins have improved beyond that due to cost cutting programs that have streamlined operations over the past two and a half years. Continued demonstration of strong earnings and cash flow relative to peers could cause Moody's to revisit the rating or outlook in 2021.

Bunge had good liquidity at March 31, 2021 with $226 million of cash and cash equivalents, as well as over $5.8 billion of availability under committed facilities. This is offset by roughly $2.7 billion of short term debt under bi-lateral lines and facilities. Bunge had no outstandings under its $600 million backed commercial paper program; the backup facility for this program is included in the available liquidity above. Bunge also has $400 million of notes maturing in September 2022 and two of its committed credit facilities expire in 2022 as well - $865 million in September and $1.75 million in December.

The rating outlook is stable but Moody's expects financial performance to be very strong in 2021 and if the company continues to outperform its peers, Moody's could move to a positive outlook.

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

An upgrade to the rating would be considered when the company is able to consistently grow earnings and cash flow while keeping Net Debt/EBITDA below 2.5x and Retained Cash Flow/Net Debt above 25%. A downgraded would be considered if Bunge changes its financial priorities, causing Net Debt/EBITDA to remain above 3.0x and Retained Cash Flow/Net Debt to remain below 20%.

ESG CONSIDERATIONS

Environmental concerns are modest for Bunge and other agricultural commodity trading companies; however, future environmental regulations may increase transportation costs. While other regulatory changes could impact trading or processing operations, we don't expect these costs to have a material effect on Bunge's business.

Social risk are higher for trading companies, but still modest relative to most other industries. Sustainable sourcing and traceability of crops are becoming bigger issues for agricultural trading companies as this issue has become a greater concern for consumers worldwide. In exports from Brazil, many large Western food companies want traceability to ensure that the products they purchase are not contributed to deforestation of the Amazon. Bunge has stated that it does not source beans or grains from newly deforested parts of Amazon; but, they cannot provide full traceability on all of the products they source from Brazil, which is the company's ultimate goal. 36% of Bunge's palm oil is certified as sustainable; which seeks to address deforestation, loss of biodiversity, use of peat lands, and other issues that impact the environment, including greenhouse gas emissions.

As a large public company on the NYSE, Bunge has relatively low governance risk. Additionally, the new management at Bunge has affirmed their commitment to relatively conservative financial policies and desire to reduce leverage, which continues to support their rating.

The principal methodology used in this rating was Trading Companies published in June 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_190422. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Bunge Limited, headquartered in St. Louis, Missouri is a global agribusiness company engaged in acquiring, storing, transporting, processing and marketing agricultural commodities and products, including soybeans, wheat, canola and corn. Bunge has a broad presence in the food chain from origination to the marketing of products including meal, edible oils, and milled corn and wheat.

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_1263068.

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.

John Rogers
Senior Vice President
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

Glenn B. Eckert
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.
© 2021 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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