S&P: Saskatchewan Wheat Pool on positive watch, Agricore United on developing watch

Standard & Poor's said it placed its ratings on Saskatchewan Wheat Pool on CreditWatch with positive implications.

At the same time, S&P said it placed its ratings on Agricore United on CreditWatch with developing implications.

The agency said that these CreditWatch placements follow the announcement of Saskatchewan's intention to make a hostile bid for Agricore United's common shares, convertible preferred shares and subordinated convertible debentures, noting that the all-equity transaction would be valued at about C$550 million.

If the bid is successful this would be positive for both companies in terms of market share, synergies and pricing power, the agency said.

As proposed, S&P said it would likely regard the new company's capital structure as aggressive, with pro forma total lease-adjusted debt to EBITDA of about 3.2x, but this would improve to less than 3.0x in 2007 given that about C$60 million in synergies would be derived from this merger.

Affected ratings include Saskatchewan's corporate credit rating at B+, senior secured debt at BB with a recovery rating of 1 and senior unsecured debt at B as well as Agricore United's corporate credit rating at BB, senior secured debt at BB, C$475 million bank loan at BB+ with a recovery rating of 1, C$359 million bank loan at BB with a recovery rating of 3 and subordinated debt at B+.

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