Fitch Affirms Cargill Inc.'s IDRs at 'A/F1'; Outlook Stable

Business Wire, Dec 22, 2008

CHICAGO -- Fitch Ratings has affirmed the ratings of Cargill, Incorporated (Cargill) and its subsidiaries as follows:

Cargill

--Long-term Issuer Default Rating (IDR) at 'A';

--Senior unsecured notes at 'A';

--U.S. medium-term notes at 'A';

--Euro medium-term notes at 'A';

--Credit facility at 'A';

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Cargill Ltd.

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Cargill Global Funding PLC

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Cargill Asia Pacific Treasury Ltd

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

The Rating Outlook is Stable. Cargill had total consolidated debt of $21.4 billion at Aug. 31, 2008.

Cargill's ratings reflect its competitive position as the largest agricultural company based in the United States and one of the largest privately owned companies in the world. Its operations span every major country and almost every agricultural commodity. Key agricultural operations include oilseed processing, corn milling, meat processing, fertilizer and animal nutrition. The ratings incorporate Cargill's high geographic and product line diversification, which lessens operating earnings volatility associated with the agricultural sector.

The ratings also factor in the company's liquidity, which is enhanced by readily marketable inventory (RMI) and high cash balances. Cargill's majority equity stake in The Mosaic Company (Mosaic) is currently valued at more than $8 billion. Cargill has the option to monetize or add to its investment in Mosaic, although management has not indicated a plan to do so. Balancing out Cargill's credit strengths are the company's significant exposure to higher risk financial businesses which have incurred earnings volatility, susceptibility to periodic negative free cash flow, and potentially weaker near-term demand for agribusiness and fertilizer products.

Cargill's earnings have remained strong despite challenging agribusiness market conditions during the past few years. In a continuation of this trend, Cargill reported solid earnings growth for the fiscal first quarter of 2009 ended Aug. 31, 2008. Net earnings increased 62% to $1.49 billion, from $917 million for the same period a year ago. Cargill's Industrial segment, which reflects the strong results of its Mosaic fertilizer business, and the Origination and Processing segment, improved substantially. Agricultural Services, Food Ingredients and Applications, and Risk Management and Financial were below year-ago levels. The pace of Cargill's overall earnings growth is likely to slow with the weak global economy. However, Cargill is expected to benefit from the recent decline in agricultural commodity prices by having a reduced need for working capital, higher cash balances, improved cash flow from operations and lower debt levels.

In addition to evaluating traditional credit measures, Fitch makes several analytical adjustments for Cargill. Fitch's analysis of agricultural companies takes into consideration leverage ratios that exclude debt used to finance RMI. This commodity inventory is highly liquid and generally hedged against price risk. Similarly, interest expense on debt used to finance RMI is reclassified as cost of goods sold and thus is excluded from EBITDA and interest expense. Fitch also excludes the debt and related earnings and interest expense of Mosaic when evaluating Cargill's credit metrics. While Cargill retains a majority interest in Mosaic which is consolidated, Mosaic's debt is non-recourse and not guaranteed by Cargill.

With the adjustments described above, Cargill's leverage (total debt to operating EBITDA) was 2.0 times (x) for the latest 12 months ended Aug. 31, 2008, and EBITDA to gross interest expense was 7.4x. On an unadjusted basis, total debt to operating EBITDA was 2.0x and EBITDA/interest was 7.7x. In addition, Fitch analyzes credit metrics that exclude the non-recourse debt of variable interest entities (VIEs), primarily related to its Risk Management and Financial segment. On this basis, leverage was 1.7x. The ratings may be reviewed if the company engages in a large acquisition or incurs an unexpected drop in earnings without a commensurate decrease in debt levels.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.