S&P rates Mosaic notes BB-, loans BB

Standard & Poor's said it assigned BB ratings with recovery ratings of 2 to The Mosaic Co.'s $250 million secured five-year term loan A-1 and $800 million secured seven-year term loan B and BB- ratings to its $475 million senior unsecured notes due 2014 and $475 million senior unsecured notes due 2016.

Mosaic's BB long-term and B-1 short-term corporate credit ratings and B+ $240 million senior unsecured debentures were affirmed.

The outlook was revised to negative from stable, and the company's existing BB+ $450 million revolving credit and $47 million term loan were placed on CreditWatch with negative implications.

Proceeds of the new bank loan tranches and the new notes will be used to refinance existing debt, thereby extending maturities

The agency said the outlook revision follows indications that phosphates volumes have weakened because of sluggish export sales and a slow start to the fall fertilizer season, which has prompted management to make a significant downward revision to its phosphates sales volume forecasts for the fiscal year ending May 31, 2007. As a result, cash flow generation is likely to be weaker than expected during the next few quarters, reducing the company's ability to lower debt.

Mosaic is highly leveraged, according to S&P. At Aug. 31, adjusted debt totaled about $3.2 billion and total adjusted debt to EBITDA was 4.8x. Given Mosaic's high leverage relative to the ratings expectations, the agency said any additional negative developments such as a prolonged period of weak sales volumes, a spike in natural gas costs or poor weather could lead to a downgrade.

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