DBRS Assigns Provisional BBB Stable Rating to Proposed Agrium New Debt Issue

DBRS has today assigned a provisional rating of BBB with a Stable trend to the senior unsecured debt issue announced today by Agrium Inc. (Agrium or the Company) (the New Notes). The net proceeds of the New Notes are to be used by the Company to repay its $125 million of aggregate principal amount of outstanding senior unsecured 8.25% debentures due February 15, 2011, and a portion of the borrowings incurred by the Company to acquire AWB Limited (AWB) (see DBRS news release: DBRS Confirms Agrium’s Senior Debt at BBB, Trend to Stable, November 23, 2010). DBRS views the issuance of the New Notes as a positive step in putting in place long-term financing to replace the Company’s maturing unsecured senior notes and for the AWB acquisition.

The New Notes are to be issued by way of a prospectus supplement, a draft of which dated December 15 2010 (Prospectus Supplement) has been issued, and once finalized will supplement the Company’s shelf prospectus dated November 20, 2009, as amended by Amendment No. 1 dated November 12, 2010 (Agrium Senior Unsecured Prospectus) and filed with the United States Securities and Exchange Commission (SEC). The New Notes will be subject to the terms of a trust indenture dated May 16, 2006, between Agrium and The Bank of New York Mellon (the Note Indenture) and they will be governed by the laws of the State of New York.

The New Notes will be senior unsecured obligations of the Company. They will rank equally with Agrium’s existing and future senior unsecured debt, and will rank senior to all of the Company’s existing and future subordinated debt. The New Notes will contain a change of control provision that requires the Company to make an offer to purchase the debentures at a price equal to 101% of their principal amount plus accrued and unpaid interest to the date of repurchase upon the occurrence of a change of control triggering event (as defined in the Prospectus Supplement). In addition, Agrium will be able to redeem the New Notes, in whole or in part, at its option, at any time and from time-to-time, at the applicable redemption prices set forth in the Prospectus Supplement, but at not less than 100% of their principal amount.

The Note Indenture contains certain covenants that, among other limitations, restrict Agrium’s ability to amalgamate or consolidate with or merge into a third party or convey, transfer or lease all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis, and limit the Company’s ability to create certain liens or enter into sale and leaseback transactions.

The provisional rating of the New Notes is based upon: (1) Agrium’s Senior Unsecured Prospectus; (2) the Company’s Preliminary Prospectus Supplement, dated December 15, 2010; (3) Agrium’s public security document filings including its third quarter 2010 report and its 2009 annual report; (4) public documents relating to AWB, the AWB acquisition and the prospective disposition of AWB’s commodity management businesses; and (5) other information provided by Agrium to DBRS as of December 15, 2010. The assignment of a final rating for the New Notes 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 methodology is Rating Mining, which can be found on our website under Methodologies.