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Global Credit Research - 11 Mar 2011
Profits and debt reduction exceed expectations
New York, March 11, 2011 -- Moody's Investors Service upgraded CF Industries Holdings, Inc.
(CF) Corporate Family Rating (CFR) to Ba1 from Ba3. Moody's
also raised the ratings on the underlying debt issues: guaranteed
senior secured credit facilities, which includes the remaining $341.1
million term loan expected to be paid down in March 2011 and the $500
million revolver, to Baa1 from Ba1. Also raised were the
$800 million unsecured notes due 2018 to Ba1 from B1, and
the $800 million unsecured notes due 2020 to Ba1 from B1.
The outlook is stable.
The Ba1 Corporate Family Rating (CFR) reflects improved market positions
and cash flows gained through the Terra merger combined with healthy market
conditions, particularly for the nitrogen industry over the intermediate
term. The rating is positively impacted by the strong liquidity
position, meaningful debt reduction over the past two quarters,
and management's demonstrated conservative financial philosophy.
The rating is tempered by the existing secured revolver in the capital
structure and that the merger marks a material change to CF's history
of being debt free. The unadjusted leverage ratio (Debt/EBITDA)
of 1.5x is already in management's target range, and with
Moody's Standard Adjustments this ratio is 1.7x as of December
31, 2010. A final factor in the upgrade is the prospect of
a multi-year time frame for a final decision on a potential expansion
An upward move to the rating could be considered if free cash flow to
debt in excess of ten percent is maintained on a sustainable basis.
Additionally we would look for an elimination of security provisions on
the bank borrowing arrangements, as is typical of investment grade
rated entities. Downward pressure to the rating is unlikely at
this time. Pressure to the rating could occur if an unexpected
and significant debt financed acquisition or other initiative is considered.
The stable outlook reflects Moody's expectation that the company
will manage future cash balances in a manner consistent with investment
grade ratings and establish a more definitive track record as a larger
combined entity (after the Terra acquisition).
The following ratings were upgraded:
CF Industries Holdings, Inc.
Corporate Family Rating to Ba1 from Ba3
Probability of Default Rating to Ba1 from Ba3
CF Industries, Inc.
$1,200 million guaranteed senior secured term loan B-1
due 2015 -- to Baa1 (LGD1, 7%) from Ba1 (LGD2,
$500 million guaranteed senior secured term revolver, due
2015 -- to Baa1 (LGD1, 7%) from Ba1 (LGD2,
$800 million 6.875% senior unsecured notes --
to Ba1 (LGD4, 60%) from B1 (LGD5, 76%)
$800 million 7.125% senior unsecured notes --
to Ba1 (LGD4, 60%) from B1 (LGD5, 76%)
The following ratings were maintained:
Speculative Grade Rating -- SGL-1
Moody's most recent announcement concerning the ratings for CF was on
April 26, 2010 at which time the outlook was changed to positive.
The principal methodologies used in this rating were Global Chemical Industry
published in December 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
CF Industries Holdings, Inc., (CF) headquartered in
Deerfield, Illinois, is a leading global producer of nitrogen
based and phosphate fertilizers. In April 2010 the company acquired
Terra Industries for approximately $4.7 billion in a combination
of cash, assumed debt, and equity. CF generated annual
revenues of $4.0 billion for the year ending December 31,
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's upgrades CF Industries to Ba1 from Ba3, outlook stable
250 Greenwich Street
New York, NY 10007
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