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29 Jul 2010
Approximately C$ 800 million of rated debt affected
New York, July 29, 2010 -- Moody's Investors Service assigned a Ba1 rating to Viterra, Inc.'s
(Viterra) proposed rule 144A US$ notes. Viterra's Ba1 Corporate
Family Rating (CFR) and other ratings were affirmed (see list below).
Proceeds from the proposed notes are to be used for debt reduction and
for general corporate purposes. The outlook is stable.
The proposed notes are expected to rank pari passu with all of Viterra's
existing and future senior unsecured indebtedness including its recent
C$1.6 billion global unsecured guaranteed revolving credit
facility executed in May 2010. Viterra's Speculative Grade Liquidity
Rating of SGL-2 indicating a good liquidity profile over the next
12 months was also affirmed.
The proposed notes and the executed C$1.6 billion global
revolving credit facility follow the September 2009 acquisition of ABB
Grain Ltd. of Australia (ABB). While the C$1.4
billion acquisition was comprised of a prudent mix of 50% equity
and 50% cash, the lack of a global unsecured revolving credit
facility had been a modest credit concern. Future draws under a
recently rated shelf (filed in Canada), if used to pay down short
term debt, will likely improve the overall credit and maturity profile
of Viterra. Specific benefits achieved through this proposed note
issuance include: an improved maturity schedule, decrease
in interest rate, and covenant consistency. The unsecured
structure of Viterra's new credit facilities is a clear credit positive,
as unsecured revolvers/debt are typically commensurate with investment
grade ratings, while secured debt is unusual at the investment grade
The Ba1 ratings reflect the growth aspirations of Viterra management and
incorporate an expectation of the financial impact of future acquisition
activity. Prior to a positive rating move we would look for the
agricultural market dynamics to remain healthy and stable, for continued
success by management at integrating ABB and other recent and potential
acquisitions, and an expectation that investment grade credit metrics
willbe achieved and sustained over a multi-year period.
The generation of free cash flow is a typical trait for investment grade
issuers, thus a free cash flow to debt ratio of over 8% on
a sustainable basis would be seen as a positive for the rating.
The stable outlook incorporates the assumption that future acquisition
activity of material size would be prudently financed. The outlook
also reflects Moody's desire to see Viterra perform over a longer period
of time with its relatively new consolidated group of assets given the
acquisition related growth strategy that management has undertaken.
Viterra's annual revenues have grown from C$1.5 billion
at the end of 2006 to C$7.5 billion for the LTM period ending
April 30, 2010 and ABB could add C$2 billion in revenues
in 2010 to the C$6.6 billion 2009 Viterra stand-alone
revenues. Total assets were estimated to approach C$6.1
billion at the end of April 2010 up from C$774 million at the end
of July 2006 an increase of over 680% over the last 45 months.
..Issuer: Viterra Inc.
Corporate Family Rating- Ba1
Probability of Default Rating - Ba1
....Senior Unsecured Regular Bond/Debentures
rated Ba1, LGD4, 57% moved from LGD4, 58%
....Senior Unsecured Rule 144A notes rated
Ba1, LGD4, 57%
Viterra's SGL-2 rating, reflecting a good liquidity profile,
is indicative of the company's significant cash generating capabilities,
balanced by the high seasonal demands on working capital for its grain
handling and agriproducts businesses (over 75% of Viterra's agriproducts
are delivered from April through June). Ongoing liquidity concerns
for grain processors center on volatility of crop and farm input pricing.
For example, a significant increase in the cost of commodity grains
can increase the working capital burden for Viterra and other processors,
and these price movements will increase the cash requirements in managing
the business. Viterra's liquidity is supported by its sizeable
cash and marketable securities of approximately C$480 million as
of the second quarter filings ending April 30th, 2010. Additionally,
we estimate that Viterra had about C$400 million drawn on the new
C$1.6 billion global multi currency credit facility at closing;
the facility is used for managing the seasonal swings in working capital.
Sustaining capital spending for 2010 is estimated at C$140 million.
Viterra does not pay a dividend on its common stock and the company further
benefits from having no near term maturities of its long-term debt.
Moody's most recent announcement concerning the ratings for Viterra was
on July 23rd, 2010, when we affirmed the CFR and assigned
a Ba1 to the proposed senior notes shelf executed by the issuer.
The principal methodology used in rating Viterra was Moody's Global Food
- Protein and Agriculture Industry rating methodology, published
in September 2009 and available on www.moodys.com in the
Rating Methodologies sub-directory under the Research & Ratings
tab. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found in the Rating Methodologies
sub-directory on Moody's website.
Viterra Inc., formerly known as Saskatchewan Wheat Pool Inc.,
is headquartered in Regina, Saskatchewan, and is the largest
grain handler in Canada. The Viterra entity was formed on May 29,
2007 after the acquisition of Agricore United ('AU') by Saskatchewan Wheat
Pool. Viterra operates through three business segments; Grain
Handling and Marketing, Agri-Products, and Processing,
but derives the majority of their income through the Grain Handling and
Marketing and Agri-Products business segment. In September
2009 Viterra acquired ABB for A$1.6 billion (C$1.4
billion) with 50% equity and 50% cash, adding global
diversity, improved access to Asia, and market share.
Revenues were C$7.5 billion for the 12 month period ending
third-quarter April 30, 2010.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's rates Viterra's proposed senior notes Ba1
No Related Data.
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