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Announcement:

Moody's rates DuPont proposed notes issue A2; ratings remain under review for possible downgrade

22 Mar 2011

New York, March 22, 2011 -- Moody's Investors Service assigned an A2 rating to the proposed senior unsecured notes offering of E. I. du Pont de Nemours and Company (DuPont, A2 senior unsecured; Prime-1 commercial paper). DuPont's ratings remain under review for possible downgrade. The securities are proposed to be issued in multiple maturities and represent drawdowns from an existing shelf.

The review was prompted by DuPont's announced agreement, January 9, 2011, to acquire Danisco A/S (Danisco - unrated) of Denmark in an all cash offer for a transaction valued at roughly $6.3 billion including $5.8 billion in cash and the assumption of approximately $500 million of Danisco's net debt. DuPont proposes to complete the transaction with $3 billion of new debt and $3 billion cash - generated from operations as well as other capital markets transactions. Danisco is good strategic fit for Dupont as a technology-driven organization, with research and application development capabilities in biotechnology. Danisco has specialty food ingredients, including enablers, cultures and sweeteners, which generate about 65% of its total sales. Genencor, Danisco's enzymes division, represents about 35% of its total sales. While strong strategically, absent expected synergies, DuPont is paying a high multiple of over 11 times. The transaction remains subject to regulatory approvals. If the transaction goes forward as proposed it is likely that DuPont's ratings could be downgraded by one or two notches.

The review for possible downgrade of DuPont's ratings reflects a shift in strategic and financial policies at DuPont as indicated by the size of the proposed transaction. Moreover, the use of $3 billion of cash to fund a portion of this $6.3 billion acquisition calls into question Moody's willingness to credit future cash balances for use in net debt ratio analysis. Furthermore, DuPont's positioning in the A2 rating category was pressured due to the recent economic downturn, combined with capital spending, increased pension liability, and large dividend. These factors in combination limit meaningful free cash flow generation such that DuPont's ratings are dependent on net debt metrics. The prospect of additional opportunistic acquisitions of size alters our evaluation of the permanence of cash balances such that net debt calculations and ratios need to be reassessed.

The review will focus on the final financing arrangements for the proposed acquisition including altered terms if any, the strategic fit of the two companies, regulatory approvals, and the level of free cash flow that can be generated to reduce debt. The review will likely be completed when potential impediments, such as approvals, have been addressed and the results of the tender have been revealed such that the transaction is expected to be consummated.

Ratings Assigned

Proposed Senior Unsecured Notes - A2

Ratings remaining under review for possible downgrade:

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

Senior Unsecured Notes - A2

Shelf Senior and Subordinated - (P)A2 & (P)A3

Commercial Paper -- Prime-1

DuPont has indicated that if all the competition approvals have not been obtained by April 1, 2011, it will extend the tender offer such that it will expire on April 29, 2011, at 5:00 p.m. EST and expects to close, if the conditions to the tender offer are satisfied early in the second quarter of 2011. There is also a redemption feature in the notes. In the event that (i) prior to October 31, 2011 DuPont abandons the acquisition of Danisco, or (ii) on October 31, 2011, DuPont has not acquired at least 80% of Danisco's outstanding shares then DuPont will redeem all of the notes at a redemption price equal to 101% of their aggregate principal amount. Currently DuPont does not intend to consummate the tender offer if less than 90% of the shares are tendered. However, DuPont has the right to go forward under the agreement provided that it does not accept less than 80% of the shares in the tender offer.

Moody's most recent announcement concerning the ratings for DuPont was on January 10, 2011 when Moody's affirmed ratings and moved the outlook to under review for possible downgrade.

The principal methodology used in this rating was Global Chemical Industry rating methodology published in December 2009.

Headquartered in Wilmington, Delaware, E. I. du Pont de Nemours and Company is one of the largest US chemical companies with a diverse portfolio of specialty materials, chemicals, polymers and agricultural products. The company reported sales of $31.5 billion for the last twelve months ending December 31, 2010 an increase of 21% relative to full year 2009 sales of $26.1 billion.

New York
William Reed
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Steven Wood
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's rates DuPont proposed notes issue A2; ratings remain under review for possible downgrade
No Related Data.
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