Monsanto Issues, Repays Debt

Zacks

Monsanto Company (MON) resorted to repaying its maturing debt by floating fresh senior notes having a 10- and 30-year maturity period.  The issue will be settled on July 12, 2012.

Senior unsecured notes worth $500 million have been issued precisely in two equal parts. The first lot consists of $250 million aggregate principal amount of 2.2% senior notes due on July 15, 2022. Yield to maturity on these notes is 2.213% and have been offered at 99.884% to the public. Interest will be paid semi-annually on these beginning January 15, 2013.

The second lot consists of another $250 million aggregate principal amount of 3.6% senior notes, due to mature on July 15, 2042. These notes will yield 3.608% on maturity and have been offered at 99.854%. Interest will be paid semi-annually on these beginning January 15, 2013.

The proceeds from the issuance will be used to repay $486 million of 7 3/8% senior notes maturing on August 15, 2012. Monsanto currently holds A1 (Stable) Rating issued by Moody’s, A+ (Stable) by S&P, and A+ (Stable) by Fitch credit rating agencies.   

We believe the debt issuance-repayment arrangement made will work in favour of the company and help it retain its solid balance sheet position. Fiscal third quarter 2012 ending, the company had approximately $1,538 million of long-term debt, net of current portions as against a whopping $1,716 million of cash and cash equivalents balance.

Monsanto’s biotechnology research and innovations position it as a market leader above its peers, such as Syngenta AG (SYT) and The Dow Chemical Company (DOW).

The current Zacks Consensus Estimate for the fiscal fourth quarter 2012 is a loss of 44 cents, representing a year-over-year decline of 98.70%. Estimates for the fiscal years 2012 and 2013 are $3.70 and $4.30, reflecting annual growth of 25.12% and 16.06%, respectively.

Monsanto has a Zacks #1 Rank, which translates into a short-term Strong Buy rating (1-3 months).

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