DBRS Rates Agrium Inc. New $1 Billion Debt Issue BBB, Stable

DBRS has today assigned a rating of BBB with a Stable trend to (1) $500 million aggregate principal amount of Senior Unsecured Debt maturing June 1, 2023, and (2) $500 million aggregate principal amount of Senior Unsecured Debt maturing June 1, 2043, (collectively 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, pending which such proceeds may be used to reduce outstanding indebtedness under its short-term credit facilities, and for general corporate purposes, including potential share repurchases. The issue of the New Notes is not expected to materially impact credit quality.

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 direct 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.

Agrium’s net debt of $3.3 billion was elevated at March 31, 2013, but the Company received CDN$939 million from Glencore International plc following CF Industries Holdings Inc.’s late-April acquisition of an interest in a Medicine Hat nitrogen facility Glencore acquired through its purchase of Viterra Inc. With Agrium’s net debt increasing by $98 million in Q1 2013 and DBRS’s expectation of ongoing high capital expenditures, higher dividend requirements and potential share repurchases throughout the rest of 2013, Agrium’s debt may again climb toward the end of the year, but overall debt levels are expected to remain manageable and its financial metrics are expected to remain consistent with the Company’s current ratings.

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.