CHICAGO (Reuters) - U.S. grains trader Bunge Ltd (BG.N) issued $1 billion of debt to replace a credit line financing a $946 million investment in a Malaysian palm oil company on Monday.
The company, which is undergoing a massive restructuring to shore up earnings, issued $400 million five-year notes, at 3 percent, and $600 million of 10-year notes, at 3.75 percent, it said in a statement.
It is paying $946 million for a 70 percent stake in IOI Loders Croklaan (IOIB.KL) and had said, when it announced that deal on Sept. 12, that it would use a $900 million credit facility to help pay for it.
On Monday, Bunge said the credit facility would be terminated once the debt issue was finalized. The credit line rate is tied to the London Interbank Offered Rates (LIBOR) and depended on Bunge’s credit rating.
“Bunge is taking advantage of low interest rates to finance the acquisition of Loders Croklaan equity and extend its maturity profile,” said John Rogers, senior vice president at Moody’s Investors Service.
Moody’s cut Bunge’s outlook to negative after the White Plains, New York-based company announced the IOI Loders Croklaan deal last week, and warned that without much improved earnings it could downgrade Bunge’s credit rating to just a step above junk.
On Monday, Moody’s confirmed its negative outlook for Bunge and rated the notes Baa2, consistent with its previous view on the company’s long-term debt.
Fitch maintained its stable outlook for Bunge and assigned a BBB rating to the debt offering, on par with its long-term rating for Bunge.
S&P Global Ratings maintained a stable outlook for Bunge.
Bunge and other grains traders, including Archer Daniels Midland Co (ADM.N) and Cargill Inc [CARG.UL], have been seeking ways to diversify and bolster earnings as a global grains glut has pressured corn and soybean prices for four years.
Bunge’s diversification focus has been on higher-margin food ingredients that complement its core grain handling, processing and shipping business. The Loders deal will get Bunge’s food and ingredients segment close to a long-term target of contributing about a third of company earnings, Chief Executive Soren Schroder told Reuters last week.
Shares of Bunge edged higher to end at $72.84, nearly 2 percent above the close last Tuesday when the Loders deal was announced.
Reporting by Karl Plume; Writing by Jo Winterbottom; Editing by Richard Chang