Moody's rates UAP Holding discount notes Caa2

Moody's Investors Service said it assigned a Caa2 rating to UAP Holding Corp.'s new $82.5 million initial value of senior unsecured discount notes due 2012. Moody's also affirmed the ratings of United Agri Products Inc., including its B3 rated $225 million of guaranteed senior unsecured notes due 2011 and B1 rated $500 million guaranteed senior secured revolver due 2008, as well as its Caa1 senior unsecured issuer rating.

Proceeds from the new discount notes will be used to purchase a significant portion of the common equity invested by the sponsors in the initial transaction as well as a portion of the series A redeemable preferred stock held by former owner ConAgra Foods Inc.

The outlook remains stable.

Moody's said the affirmation of the company's ratings reflects Moody's prior recognition that the company's equity structure was subject to potential change. Adjusted for the financing, the sponsor's equity investment will decrease to $67 million from $120 million, while the series A redeemable preferred stock will decrease to $34 million from $60 million.

Additionally, UAP's pro forma consolidated leverage will slightly worsen, with debt to EBITDA increasing to 5.3 times from 4.7 times (including the preferred stock as debt) over the last 12 months ended Aug. 24, 2003.

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