Moody's rates Phosagro notes Baa3

Moody's Investors Service said it assigned a Baa3 long-term issuer rating to OJSC Phosagro and a provisional Baa3 rating to the $500 million dollar-denominated loan participation notes to be issued by PhosAgro Bond Funding Ltd., an orphan special purpose vehicle, for the purpose of on-lending the proceeds to Phosagro.

The outlook is stable.

Proceeds will be used for general corporate purposes, which may include repayment of debt and buying out minority stakes in Phosagro's subsidiaries.

"The assigned Baa3 long-term issuer rating balances Phosagro's strong operational and financial performance, including low leverage and high cash flow generation against the volatility in the crop nutrient market, the cyclical nature of the company's commodity business and the fact that there has been a relatively limited track record of Phosagro in the current setup and as a publicly listed company," Sergei Grishunin, a Moody's assistant vice president, said in a statement.

Phosagro's rating reflects its consistent track record of strong operational and financial performance, high cash flow generation and low leverage of four-year average adjusted debt to EBITDA of about 0.6x, according to the agency.

Leverage is expected to rise to about 1.0x in 2012 and 2013 due to the Phosagro's acquisition of minority interests, the agency noted.

The Baa3 long-term issuer rating is constrained by historical volatility in the crop nutrient market as well as the cyclical nature of this commodity business, Moody's said.

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