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 $500 million aggregate principal amount of Senior Unsecured Debt (the New Notes) to be issued by Agrium Inc. (Agrium or the Company) as announced by the Company today. The net proceeds of the New Notes are to be used by the Company to fund anticipated capital expenditures and for general corporate purposes. DBRS views Agrium’s new debt issuance as a prudent funding initiative in light of planned capital expenditures for its Vanscoy Potash expansion, the Company’s funding requirements related to its support and purchase agreement with Glencore International plc (Glencore) to acquire certain assets from Viterra Inc. (Viterra; rated BBB (low) by DBRS) and its recently announced substantial issuer bid seeking to purchase up to CDN$900 million of its own shares.

On March 20, 2012, Agrium announced that it had entered into a support and purchase agreement with Glencore to acquire the majority of Viterra Inc.’s agri-products business upon completion of Glencore’s acquisition of Viterra. Glencore is currently undergoing the process of obtaining the required consents to transfer and applicable regulatory clearances, as well as other closing matters, to complete the purchase of Viterra and the transfer of the agreed to assets to Agrium. As part of the arrangements, Agrium has agreed to advance a loan of CDN$1.8 billion to Glencore at the time Glencore is first required to pay for Viterra shares pursuant to the Glencore acquisition. Following adjustment for the certain excluded farm centres, the Agrium purchase price of the Viterra is expected to be approximately CDN$1.65 billion, including estimated working capital of approximately CDN$0.4 billion. Agrium has further reached an agreement with Glencore for Glencore to sell to CF Industries Holdings, Inc. (CF Industries), upon closing of Glencore’s acquisition of Viterra, a 34% interest in Canadian Fertilizers Limited (which owns a nitrogen facility located in Medicine Hat, Alberta) for approximately CDN$915 million pursuant to the terms of the purchase and sale agreement between Glencore and CF Industries, dated August 2, 2012. The net proceeds of such sale by Glencore to CF Industries will be payable to Agrium for its account and benefit, effectively reducing Agrium’s CDN$1.65 billion purchase price of the Viterra assets it intends to acquire.

In addition, Agrium, on September 12, 2012, initiated an offer to purchase for not more than CDN$900 million in cash up to 9.5 million Agrium common shares. The issuer bid will expire October 19, 2012, unless otherwise withdrawn, extended or varied.

The New Notes are to be issued by way of a prospectus supplement to the Company’s short-form base shelf prospectus dated April 2, 2012. 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) as to be supplemented by a supplemental indenture related to the New Notes. 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, 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 base shelf prospectus dated April 2, 2012; (2) the Company’s Preliminary Prospectus Supplement, dated September 24, 2012; (3) the Note Indenture, as to be supplemented by a supplemental indenture related to the New Notes; (4) Agrium’s public security document filings, including its second quarter 2012 report and its 2011 annual report; (5) public documents relating to the Company’s substantial issuer bid and its support and purchase agreement with Glencore; and (6) other information provided by Agrium to DBRS as of September 24, 2012.

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 methodologies are Rating Companies in the Mining Industry (June 2011) and Rating Companies in the Industrial Products Industry (June 2011), which can be found on our website under Methodologies.