Fitch Affirms Bunge's IDR at 'BBB'; Outlook Stable

  Fitch Affirms Bunge's IDR at 'BBB'; Outlook Stable

Business Wire

CHICAGO -- May 22, 2014

Fitch Ratings has affirmed Bunge Ltd.'s (Bunge) 'BBB' long-term IDR. The
ratings apply to approximately $5.9 billion of total outstanding debt
(granting 50% equity credit for Bunge's convertible preference shares). The
Rating Outlook is Stable.

See a full list of ratings at the end of this release.

KEY RATING DRIVERS

Bunge's overall earnings are concentrated in the agribusiness segment that
presently contributes around three-quarters of overall revenues and operating
income. The agribusiness industry has favorable long-term demand prospects
from increased protein consumption in developing nations as well as higher use
of biofuels across the globe.

Unadjusted debt leverage fluctuates in conjunction with commodity prices,
tending to increase when pricing rises as incremental debt is needed to
finance working capital demand. Fitch sees Bunge's unadjusted leverage
generally falling in the range of 2.5x to 3.5x, and leverage adjusted for
readily marketable inventories (RMI) staying below 1.0x.

Bunge placed its sugar and bioenergy businesses under strategic review,
specifically related to the poor performance of the industrial operations
since the company meaningfully expanded the business in February 2010. Since
that time, the sugar and bioenergy segment has significantly underperformed
leading to pressure on Bunge's overall margin. Timing of the action as well as
amount and use of proceeds are uncertain.

Bunge has extensive external sources of liquidity that acts as strength while
internal cash flow generation vacillates due to inherent unpredictability of
commodity pricing dramatically affecting working capital needs. Bunge had
$3.55 billion in capacity available under its revolving bank agreements and
commercial paper program. Bunge also had approximately $4.56 billion in
readily marketable inventories of agricultural commodities (including Fitch's
10% discretionary haircut) as of March 31, 2014.

Leading global position in oilseed processing

Bunge's ratings reflect the company's strong presence in oilseed processing,
and some diversification across its business portfolio. Following the
divestiture of the retail fertilizer business and a possible sale of the sugar
businesses as a result of the strategic review currently underway, Bunge is
more reliant on earnings and cash flow generated from the agribusiness
segment, which currently represents around three-quarters of revenues and
operating income. Relatively steady EBIT of the operating segment over the
past years at approximately $1 billion annually offset losses from the sugar
and bioenergy division.

Despite a rough start to the year, earnings support through the year will stem
from greater commercialization of Brazilian and Argentinian harvests as well
as potentially larger U.S. crops. Excessive supply of soybeans in China may
continue to pressure margins over the near-term. Fitch also anticipates that
overall earnings growth will be supported by increased contributions from food
and ingredients coupled with decreasing losses from the sugar segment.

Fitch feels that Bunge can maintain overall EBITDA in the range of $1.7
billion to $2 billion in most years underpinned by a minimum of $1 billion of
annual operating income derived from the agribusiness segment. Long-term, the
outlook for the agriculture industry is favorable given higher consumption of
protein in developing countries and increasing demand for biofuels.

Commodity price variations impact working capital

Bunge along with other agricultural processors are subject to commodity
pricing volatility arising from a number of uncertainties including weather
conditions, animal disease outbreaks, and government agricultural policy
changes. Higher priced inventories drive increased leverage and pressure cash
flows, and vice versa when prices decline. As such, free cash flow (FCF,
operating cash flow less dividends and capital spending) jumps from positive
to negative virtually every year. FCF was negative $1.7 billion, $937 million
and negative $173 million for 2012, 2013, and the LTM ending March 31, 2014,
respectively.

A price spike from drought conditions in the U.S. negatively affected cash
flow and working capital levels in 2012, while more stable pricing resulting
from abundant harvests has helped to steady cash flows hence. Cash flows this
year will benefit from capital preservation efforts, especially in the sugar
business that will ease overall spending to around $900 million. Fitch sees
the possibility of consecutive years of positive FCF in 2014, albeit modest.

Extensive external liquidity backstops internal cash flow volatility

Bunge's extensive external sources of liquidity act as a strength while
internal cash flow generation fluctuates due to the inherent instability of
commodity pricing. Bunge had $4.8 billion in committed liquidity capacity
under its revolving bank agreements and commercial paper program at the end of
the first quarter, of which $3.55 billion was available. Bunge Finance Europe
B.V. recently executed a new three-year $1.75 billion revolving credit
facility maturing in March 2017, replacing a prior $1.75 billion credit
facility. Bunge can extend the new facility by two one-year periods and expand
capacity by $250 million, subject to mutual agreement with the lenders.

Fitch recognizes additional support to Bunge's already strong liquidity
provided by RMI of agricultural commodities including soybeans and sugar that
totaled $4.56 billion on March 31, 2014. RMI is highly liquid given widely
available markets and international pricing mechanisms. In addition, Bunge
also participates in a $700 million receivables securitization program and has
$632 million in balance sheet cash and cash equivalents.

Short-term debt stressing leverage

Incremental debt utilized to finance working capital demands places stress on
leverage; however, Fitch sees gross leverage (total debt to EBITDA) generally
staying in the range of 2.5 times (x) to 3.5x. Fitch recognizes Bunge's
commitment to an investment grade credit rating via sustained balance sheet
strength and financial discipline. Total debt leverage rose to 3.5x for the
LTM ending March 31, 2014 from 2.5x at the end of 2013 due to a higher level
of short term borrowings to fund inventories of soybeans as South America
commercializes its harvest.

Higher earnings weighted to the second half of the year coupled with a reduced
debt load should yield gross leverage at the lower half of the historical
range, in Fitch's estimation. Bunge's coming long-term debt maturities are
manageable given the company will see $382 million in 5.1% unsecured notes
maturing in July 2015.

Fitch also considers RMI in the evaluation of credit measures utilizing a 10%
discretionary reduction to Bunge's reported RMI. In the RMI-adjusted debt
leverage calculation, Fitch excludes incremental debt utilized to fund the RMI
and reduces EBITDA by the amount of interest on the debt used to finance RMI
(i.e RMI interest is reclassified to costs of goods sold). Similarly, interest
expense on debt used to finance RMI is excluded from EBITDA and interest
expense in the calculation of EBITDA-to-interest coverage ratios. Using the
adjustments, RMI-adjusted debt leverage was 0.8x and 0.4x, and RMI-adjusted
interest coverage was 4.8x and 6.2x for the LTM ending March 31, 2014 and full
year 2013, respectively.

RATING SENSITIVITIES

Future developments that may individually or collectively, lead to a negative
rating action:

--Fitch is comfortable with Bunge operating with gross debt leverage in the
range of 2.5x to 3.5x. However, rating pressure will arise if EBITDA
compression and/or a higher debt load leads to sustained unadjusted leverage
exceeding 3.5x or RMI-adjusted leverage rising above 1.0x;

--A consistent lack of FFO coverage of capital spending and dividends, such
that meaningful incremental debt funding becomes necessary;

-- A material increase in leverage from a significant debt financed
transaction, most likely a large acquisition.

Fitch sees a positive rating action as unlikely over the intermediate term.
However, Fitch will favorably view a commitment to operate with total debt
leverage in the vicinity of the low 2.0x range, coupled with material FCF
generation for multiple years.

Fitch affirms Bunge's rating with a Stable Outlook as follows:

Bunge Limited:

--Long-term IDR at 'BBB';

--Preference shares at 'BB+' .

Bunge Limited Finance Corp. (BLFC):

--Long-term IDR at 'BBB';

--Senior unsecured bank facility at 'BBB';

--Senior unsecured notes at 'BBB'.

Bunge Finance Europe B.V. (BFE):

--Long-term IDR at 'BBB';

--Senior unsecured bank facility at 'BBB'.

Bunge N.A. Finance L.P. (BNAF):

--Long-term IDR at 'BBB';

--Senior unsecured notes at 'BBB'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and
Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=831369

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Contact:

Fitch Ratings
Primary Analyst
Michael Zbinovec
Senior Director
+1 312-368-3164
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Judi Rossetti, CFA, CPA
Senior Director
+1 312-368-2077
or
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Wesley E. Moultrie II, CPA
Managing Director
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or
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Alyssa Castelli, +1 212-908-0540
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