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Moody's sees possible downgrade of ADM

NEW YORK (AP) -- Moody's Investors Service on Tuesday placed Archer Daniels Midland Co. under review for a possible credit ratings downgrade Wednesday, citing spending concerns should the agribusiness giant complete a proposed acquisition of Australian company GrainCorp Ltd.

ADM has been looking to invest in overseas suppliers. Australia is a major exporter of commodities, including iron ore and wheat, and GrainCorp handles 90 percent of the bulk grain exports from eastern Australia.

Last week ADM said that it offered to buy GrainCorp for about $3.1 billion, adding to the portion of the company that ADM already owns.

GrainCorp's board agreed to recommend the offer to shareholders for approval. ADM, which has been examining GrainCorp's books, is expected to announce its final decision on whether to proceed with the deal on Wednesday.

Moody's said its review of ADM's credit ratings will focus on the final cost of the proposed GrainCorp takeover, potential asset sales as a result of the transaction and financing for the deal, among other factors.

In addition Moody's will gauge how well the combined company can generate cash and tackle its debt over the next 18 to 24 months.

"Given its elevated capital spending and high crop prices, ADM's ability to generate free cash flow is less certain thereby making the financing of this transaction more important," said John Rogers, a senior vice president at Moody's.

The ratings firm noted that, should it decide to lower ADM's ratings, the downgrade would likely be limited to one notch.

Shares of Decatur, Ill.-based Archer Daniels Midland fell 9 cents to close at $33.94.