Agrium (AGU) to Issue and Sell Debentures Worth $1 Billion - Analyst Blog

Fertilizer maker Agrium Inc. (AGU) has agreed to issue and sell debentures worth $1 billion, comprising $550 million aggregate principal amount of 3.375% debentures, due Mar 15, 2025, issued at a price of 99.855% of the aggregate principal amount. The balance $450 million aggregate principal amount of 4.9% debentures, due Mar 15, 2035, will be issued at a price of 99.110% of the aggregate principal amount.

The debentures are registered under the multi-jurisdictional disclosure system in Canada and the U.S. Issuance and sales of the debentures will be restricted only to the U.S. The offering, which is subject to customary closing conditions, is anticipated to close on or around Mar 2, 2015.

The total proceeds from the offering are anticipated to be used by the company for reducing short-term debt. The joint book-running managers involved in the offering are Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets, LLC and CIBC World Markets Corp. The debentures will be unsecured and equal in rank with Agrium’s existing senior unsecured debt.

Agrium expects to utilize this opportunity to gain from a strong bond market by securing lower interest rates for use in the future. The company is optimistic that the proceeds, which will be used to reduce debt, will strengthen its balance sheet as it has just $625 million of long-term debt maturity in the next five years. Moreover, Agrium will be well positioned in terms of financial flexibility, with no impact on its leverage ratio.

The necessary documents, including a preliminary prospectus supplement dated Feb 25, 2015, under Agrium's short form base shelf prospectus dated Apr 24, 2014 and the company’s related effective Registration Statement on Form F-10, associated with the debentures offering, have been filed with the Canadian securities regulatory authorities in Canada and the U.S. Securities and Exchange Commission, under the multi-jurisdictional disclosure system. The final prospectus is yet to be filed with the same authorities in both countries.

Agrium currently carries a Zacks Rank #2 (Buy).

Other well-ranked companies in the fertilizer industry include Yara International ASA (YARIY), CF Industries Holdings, Inc. (CF) and The Mosaic Company (MOS). While Yara International sports a Zacks Rank #1 (Strong Buy), both CF Industries and Mosaic carry a Zacks Rank #2.

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