S&P Lifts Mosaic To Investment Grade (MOS)

The Mosaic Co. (NYSE: MOS) has just received an Investment Grade rating from independent ratings agency Standard & Poor’s Ratings Services.  The bond rating service has raised its corporate credit rating on  to ‘BBB-‘ from ‘BB+’ and the outlook is "positive."

S&P said the issue-level ratings on Mosaic’s and its subsidiary Mosaic Global Holdings Inc.’s senior unsecured debt ratings were also raised to ‘BBB-‘ from ‘BB+’, and it affirmed issue-level ratings on Mosaic’s senior secured credit facility at ‘BBB’ one notch above the corporate credit rating.

S&P has also withdrawn all "recovery ratings" on Mosaic’s and MGHI’s debt now that it is no longer in "junk" status after going above the BB+ hurdle on this last move.

This was based on continued strengthening of Mosaic’s financial profile as its robust operating cash flow has been used to reduce debt and to build a sizable cash balance.  Mosaic’s financial policies should also remain supportive of an investment-grade rating from S&P. With the strong pricing power that fertilizer and potash companies have enjoyed, many may have anticipated this move.

Interestingly enough, S&P also said it could raise the ratings further in coming quarters if credit metrics continue to strengthen and if the company remains prudent with respect to potential dividends, acquisitions, and capital spending.

Total adjusted debt outstanding as Feb. 29, 2008, was $2.2 billion.  It also had roughly $1.6 Billion in cash, equivalents, and long-term investments.  While corporate debt and corporate credit rankings do not translate directly to company stock prices, it does contribute to lower borrowing costs and can contribute further to equity fund analysis where some funds only invest in companies with "investment grade" corporate credit ratings.

Earlier this week the company issued 2009 financial targets, and this move from S&P follows a similar debt and corporate rating upgrade from Fitch earlier in the week.

Jon C. Ogg
June 6, 2008