CHICAGO, Oct 11 (Reuters) - Fitch Ratings on Wednesday became the second major ratings agency to put Syngenta AG on notice for a potential downgrade, over uncertainties surrounding the Swiss-based company’s genetically modified corn lawsuit liabilities.
Fitch said it has put the world’s largest crop chemical company on “rating watch negative,” flagging concerns about how Syngenta will pay to settle the lawsuits and whether the Chinese government will support litigation liabilities. Fitch rates Syngenta at BBB, two notches above junk.
“While the amount of the settlement is currently unknown, it may threaten the pace of the company’s future deleveraging absent a financial intervention by ChemChina,” Fitch said in a statement.
Syngenta officials could not be immediately reached for comment.
The company’s low investment-grade rating, linked in part to its expected ability to reduce leverage as well as ChemChina providing financial support, is not consistent with its financial profile, Fitch said. Syngenta has agreed to be acquired by ChemChina for $44 billion.
S&P Global Ratings last week placed Syngenta’s rating on credit watch with negative implications. It downgraded Syngenta to BBB-minus in May, putting it a notch above junk.
The agrochemical industry is in a consolidation race as the sector wrestles with a global grain glut that has stretched into its fourth year.
In late September, Syngenta pulled a $7 billion bond after struggling to drum up interest in the face a raft of lawsuits related to its genetically modified corn.
The bond was intended to help finance ChemChina’s acquisition of split-rated Syngenta, which also carries a Ba2 and BBB rating from Moody’s and Fitch.
Syngenta announced a day later it would settle U.S. farmer lawsuits stemming from its decision to commercialize a GMO corn strain before China approved importing it. A person familiar with the matter said the payment would be close to $1.5 billion.
Xiao Yaqing, chairman of China’s state-owned Assets Supervision and Administration Commission, recently told a media outlet the government would not give ChemChina financial help. (Additional reporting by Eleanor Duncan in New York; Editing by Meredith Mazzilli)