DBRS Releases Report on Canpotex Limited

DBRS Limited (DBRS) has today released a report on Canpotex Limited (Canpotex or the Company) that supports the recent confirmation of Canpotex’s Issuer Rating and Senior Unsecured Debt ratings at A (low) with Stable trends.

Canpotex’s ratings are underpinned by the flow-through nature of the organization, which allows it to purchase potash from its owners Agrium Inc. (rated BBB by DBRS), Mosaic Canada Crop Nutrition, LP and Potash Corporation of Saskatchewan Inc. (rated BBB (high) by DBRS) at a price based on the price the potash is sold less all costs properly incurred by Canpotex to deliver and sell the potash, including debt costs. As such, payments made to its shareholders for potash purchased provide a significant freeboard to absorb any price or volume variation on potash sales or unforeseen costs incurred in the marketing, delivery or financing of those potash sales. In addition, Canpotex’s shareholders (potash suppliers) indemnify the Company for any expenses not covered by potash sales receipts, including debt service expenses. Together, these factors account for Canpotex’s ratings being higher than those of its shareholders.

The Company is currently engaged in restructuring its relationship with and expanding the operations of Portland Bulk Terminals, L.L.C., which is being financed with a portion of the proceeds of a $250 million debt issue completed in January 2015.

International potash markets have been volatile over the last ten years, but potash prices appear to have stabilized following an approximate 25% decline since 2011 and 2014 consumption is estimated to be near record levels. With Canpotex’s net free cash flow before payment to producers for potash averaging $2.5 billion per year in the five years ending 2013 ($2.3 billion to June 30, 2014, as annualized by DBRS), the Company’s financial strength remains solid despite pro forma debt levels rising to about $380 million.

Today’s report and the February 6, 2015, press release are available at www.dbrs.com or by contacting us at info@dbrs.com.

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

The applicable methodology is General Corporate Methodology (November 2014), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.