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Bunge Limited Finance Corp. -- Moody's assigns Baa3 rating to Bunge's new notes

·14 mins read

Rating Action: Moody's assigns Baa3 rating to Bunge's new notes

Global Credit Research - 10 Aug 2020

New York, August 10, 2020 -- Moody's Investors Service, ("Moody's") has assigned a Baa3 rating to Bunge Limited Finance Corp.'s $500 million issuance of guaranteed senior unsecured notes due 2025. Bunge Limited Finance Corp. is a wholly-owned subsidiary of Bunge Limited ("Bunge") and these notes are fully, unconditionally, and irrevocably guaranteed by Bunge Limited. Proceeds are expected to be used for general corporate purposes including the refinancing of short-term debt. The rating outlook is stable.

"Bunge is terming out some of its short term debt, which will improve liquidity ahead of maturities later in 2020 and extend its maturity profile" stated John Rogers, Senior Vice President at Moody's Investors Service.

Assignments:

..Issuer: Bunge Limited Finance Corp.

....Gtd Senior Unsecured Debt due 2025, Baa3

RATINGS RATIONALE

Bunge's Baa3 long-term debt rating is supported by its relatively conservative balance sheet (as measured by net working capital-to-net balance sheet debt), an established position in the agricultural commodity industry and by its geographic diversity. Bunge's financial metrics are supportive of the current rating with net leverage of 2.8x and Retained Cash Flow/Net Debt of 19%. New management has continued to cut costs and improve financial performance relative to 2019. However, headwinds in some businesses remain, which could lead to slightly weaker metrics by year-end. Bunge has good liquidity with access to over $5 billion of funds through a variety of committed credit facilities.

The stable outlook reflects Moody's expectation that credit metrics will remain near current levels with Net Debt/EBITDA remaining below 3.0x and Retained Cash Flow/Net Debt of close to 20%.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's would upgrade the rating if the company was able to consistently generate Net Debt/EBITDA below 2.5x and Retained Cash Flow/Net Debt above 25%. Conversely, should Bunge's credit metrics sustainably weaken (Net Debt/EBITDA materially above 3.0x and Retained Cash Flow/Net Debt sustained below 20%), Moody's could lower the company's rating by a notch.

ESG CONSIDERATIONS

Environmental concerns are modest for Bunge and other agricultural commodity trading companies; however, future regulations may increase transportation costs. While other regulatory changes could impact trading or processing operations, we don't expect these costs to have a material affect on Bunge's business. Social risk are higher for trading companies, but still modest relative to most other industries. Sustainable sourcing and traceability of crops are becoming bigger issues for this industry as this becomes a higher profile issue for consumers worldwide. Bunge's biggest exposure is palm oil. The Loders Croklaan deal greatly increased its exposure to palm oil, which has faced consumer backlash regarding sustainability. However, 36% of Bunge's palm oil is certified as sustainable; which seeks to address deforestation, loss of biodiversity, use of peat lands, and other issues that impact the environment, including greenhouse gas emissions. As a large public company on the NYSE, Bunge has relatively low governance risk. Additionally, the new management at Bunge has affirmed their commitment to relatively conservative financial policies and desire to reduce leverage, which continues to support their rating.

The principal methodology used in this rating was Trading Companies published in June 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_190422. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Bunge Ltd., headquartered in St. Louis, Missouri, is a global agribusiness company engaged in acquiring, storing, transporting, processing and marketing agricultural commodities and products, including soybeans, wheat, canola, and corn. Bunge has a broad presence in the food chain from origination to the marketing of products including shortenings, edible oils, milled corn and wheat. Bunge has revenues of roughly $40 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

John Rogers Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Glenn B. Eckert Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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