Moody’s downgrades Potash

Moody's Investors Service said it downgraded Potash Corp. of Saskatchewan Inc. ratings to Baa1 from A3 due to deterioration in fertilizer-industry conditions that are expected to persist for longer than previously expected.

The company’s credit metrics are expected to weaken as a result of lower fertilizer prices and the potential for increased market volatility as new potash and nitrogen fertilizer capacity comes on-stream over the next two years, Moody’s explained.

The agency also affirmed Potash's commercial-paper rating at prime-2. The ratings remain under review for downgrade due to its pending merger with Agrium Inc., Moody’s added.

Although management has taken significant steps to retain the A3 rating, market conditions will make it extremely difficult for the company to generate credit metrics supportive of the A3 rating over the next two years, the agency said.

The downgrade also reflects an expectation that the decline in fertilizer prices over the past two years, combined with new capacity coming on-stream over the next two years, will result in persistently low pricing into at least 2018, Moody’s added.

This will result in further weakening of metrics with leverage likely remaining at higher than 3x for more than a year, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.