Moody's may cut United Agri Products

Moody's Investors Service said it placed the ratings of United Agri Products Inc. (senior implied at B2) and UAP Holding Corp. on review for possible downgrade.

Moody's said the action is prompted by the company's decision to go public using a transaction structure (Income Deposit Securities - IDS) that substantially increases the company's total debt outstanding as well as raises its interest and expected dividend payments. UAP's senior unsecured notes and UAP Holdings' discount notes will be refinanced in conjunction with the transaction.

Ratings placed on review for downgrade include UAP Holding Corp.'s senior unsecured discount notes due 2012 at Caa2 and United Agri Products Inc.'s $225 million guaranteed senior unsecured notes due 2011 at B3 and $500 million guaranteed senior secured revolver due 2008 at B1.

In the proposed transaction, the current owners will sell a substantial portion of their equity in a secondary transaction structured as IDS. Each IDS will comprise senior subordinated debt securities and equity securities of UAP Holdings. The existing unsecured notes of UAP will be repaid and partially refinanced with a new term loan.

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