Deere Ratings Affirmed by Fitch IBCA

Business Wire, Dec 16, 1999

NEW YORK--(BUSINESS WIRE)--Dec. 15, 1999--

All long-term and short-term ratings for Deere Company and its related entities are affirmed by Fitch IBCA following the company's announcement that it will acquire the Timberjack Group of Finland for $600 million in cash.

Specifically, the 'F1' and 'A' senior debt ratings are affirmed for Deere & Company, John Deere Capital Corp., John Deere Credit, Inc., John Deere Credit Group PLC, and John Deere Credit Limited. Affirmation applies to approximately $4.5 billion of short-term borrowing and $3.8 billion of long-term debt; of total debt of $8.3 billion, $1.7 billion is in the equipment operations and $6.6 billion is in the sales finance operations. The transaction is scheduled to close early next year, following U.S. and EU regulatory reviews.

Timberjack Group, with sales of approximately $580 million, is an important producer of logging equipment, complementing Deere's own product lines. Though small relative to Deere's other operations, this acquisition nonetheless provides additional diversification to Deere's important construction equipment business and expands its global footprint.

The company will likely borrow the cash to finance this acquisition, temporarily impairing credit protection measures already weakened by the rapid and severe decline in U.S. agricultural equipment earnings over the past year. However, Deere has managed spending and working capital during this interval, generating surpluses for debt reduction. While Fitch IBCA expects no material improvement in agricultural industry conditions over the near term, the downside risk to Deere's earnings and cash flow at this juncture is limited relative to the upside potential.

Deere & Company, headquartered in Moline, Ill., is among the world's leading producers of agricultural, construction and consumer equipment. Its supporting operations provide finance and leasing to facilitate the sale of Deere products. Deere sells its equipment primarily through a worldwide network of 3400 independent dealers, of which 1700 are in North America.