DBRS Rates Canpotex Limited New $250 Million Debt Issue A (low), Stable

DBRS Limited (DBRS) has today assigned a rating of A (low) with Stable trend to (1) $100 million of 3.61% Senior Unsecured Notes due January 8, 2025; (2) $50 million 3.86% Senior Unsecured Notes due January 8, 2030; (3) $75 million 4.08% Senior Unsecured Notes due January 8, 2035; and (4) $25 million 4.55% Senior Unsecured Notes due January 8, 2045 (collectively, the New Notes) to be issued by Canpotex Limited (Canpotex or the Company) by way of private placement, which is expected to occur on January 8, 2015. Canpotex intends to use the net proceeds from the sale of the New Notes for terminal expansion and other capital infrastructure projects, and for general corporate purposes.

The New Notes are expected to be issued on January 8, 2015, pursuant to a Note Purchase Agreement dated November 13, 2014 (the Note Purchase Agreement). The New Notes are not guaranteed by Canpotex’s subsidiaries or otherwise.

It should also be noted that the terms of Canpotex’s $85 million and CAD 55 million of Senior Unsecured notes issued in February 2013 have been amended such that they will no longer be unconditionally guaranteed by all of Canpotex’s existing and future wholly owned subsidiaries.

Canpotex’s payment obligations under the New Notes will, upon issuance of the New Notes, rank at least pari passu, without preference or priority, with all of the Company’s other unsecured and unsubordinated Indebtedness (as such term is defined in the Note Purchase Agreement).

Canpotex is subject to covenants under the Note Purchase Agreement, including covenants that: (1) provide limitations on Liens; (2) restrict certain transactions involving Canpotex or a Subsidiary with an Affiliate; (3) restrict certain actions of Canpotex in regards to its Shareholders’ Agreement and the Producer Agreement; (4) provide for restrictions on the Company’s ability to effect consolidations, mergers and the conveyance, transfer or lease of all or substantially all of its assets; (5) provide restrictions on the Company’s and any Subsidiary’s ability to change its line of business; (6) prohibit the Company from permitting Priority Debt to exceed 5% of the five-year rolling average of historical annual consolidated earnings of the Company before interest, taxes, depreciation and amortization, prior to payments to shareholders; and (7) prohibit the Company from permitting the ratio of Available Cash Flow for Debt Service to Total Annual Principal Repayment and Interest Expense to be less than 3.0 to 1.0. Such covenants are more fully described in the Note Purchase Agreement, and capitalized terms used in this paragraph, unless otherwise defined in this press release, have the respective meanings ascribed to such terms in the Note Purchase Agreement.

Canpotex is one of the largest potash marketing and logistics organizations in the world, focused on potash sales outside of Canada and the United States from its shareholders’ or their affiliates’ Saskatchewan mining operations. It provides its shareholders or their affiliates with logistics efficiencies through economies of scale, operational expertise and shipment coordination. The Company has long-term access to key shipping and infrastructure assets while retaining the flexibility in agreements to reflect changing potash market conditions.

Over the longer term, Canpotex shareholders or their affiliates are expected by DBRS to complete significant increases in mine operating capacity. With a relatively mature North American potash market, the bulk of increased sales is expected to be international, increasing the volumes handled by Canpotex. Accordingly, Canpotex is examining options for increases in terminal and other logistics capacity that may require further external funding.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

DBRS has developed and utilized a credit-specific methodology published in an appendix to our General Corporate Methodology (November 2014).