DBRS Assigns Provisional BBB (high) Rating with a Stable Trend to New Potash Corporation Senior Unsecured Notes

DBRS has today assigned a provisional rating of BBB (high) with a Stable trend to up to $1 billion principal amount of long-term notes (collectively, the Notes) to be issued by Potash Corporation of Saskatchewan Inc. (Potash or the Company). Potash intends to use the net proceeds for general corporate purposes, including repurchases of its common shares pursuant to a $2.0 billion share repurchase program announced on November 16, 2010 (see related DBRS news release dated November 17, 2010). Although DBRS believes that Potash has the credit capacity to sustain its share purchase program in addition to its normal operating activities and an ambitious capital expenditure program, DBRS views the issuance of the Notes as a prudent step in maintaining the Company’s liquidity.

The Notes will be issued pursuant to an indenture dated February 27, 2003, between Potash and The Bank of Nova Scotia Trust Company of New York, the trustee for the Notes. The indenture governing the Notes is, and the Notes will be, governed by, and construed in accordance with, the laws of the State of New York.

The Notes will be senior unsecured obligations of Potash and will rank equally in right of payment with all of Potash’s existing and future senior unsecured indebtedness. The terms of the Notes will include a change of control provision, which upon the occurrence of both (1) a change of control and (2) a downgrade of a particular series of notes below an investment grade rating (as specified), will require Potash to make an offer to purchase such series of notes at a price equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest to the date of repurchase. The Notes will also be redeemable, in whole or in part, at the option of Potash at any time and from time to time at a redemption price equal to the greater of: (1) 100% of the principal amount of the notes to be redeemed; and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed on the redemption date (not including any portion of any payments of interest accrued to the redemption date) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at specified discount rate; plus any accrued and unpaid interest.

DBRS believes that Potash has the financial capacity to carry out the planned share repurchase program and maintain credit metrics acceptable for its ratings. As at September 30, 2010, Potash had unutilized credit facilities available amounting to approximately $2.9 billion, in addition to approximately $360 million in cash on hand. The Company’s $2.2 billion operating cash flow in the first nine months of 2010 has been sufficient to support approximately $1.5 billion in capital expenditures and dividends. DBRS expects that the recovery of fertilizer markets seen in the first three quarters of 2010 will continue in the fourth quarter of the year and into 2011, due to high crop commodity prices, generally low fertilizer inventories and rising fertilizer demand, particularly in Potash’s export markets. Despite the expected continuation of high capital expenditures in 2011, DBRS notes that capex will largely be supported by operating cash flow during the year. In addition, Potash faces the maturity of $600 million in debt during 2011.

The provisional rating of the Notes is based on Potash’s preliminary prospectus supplement dated November 22, 2010, to the Company’s prospectus dated June 28, 2010, both filed with the United States Securities and Exchange Commission, as well as Potash’s public security document filings including its third quarter 2010 report and its 2009 annual report, plus other information provided by Potash to DBRS as of November 22, 2010. The assignment of final ratings is subject to receipt by DBRS of final documentation that is consistent with that which DBRS has already reviewed.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Mining and Rating Fertilizer Companies, which can be found on our website under Methodologies.