CF Industries May Be Cut to Junk by Moody’s on Weak Prices

  • Fertilizer slump seen persisting ‘longer than expected’
  • CF cut to Baa3 from Baa2, with further reduction possible

Moody’s Investor Services lowered its rating on CF Industries Inc., the U.S. nitrogen-fertilizer maker, and said it may be cut to junk as a slump in the fertilizer industry is seen persisting.

CF’s rating was lowered to Baa3 from Baa2, as deteriorating industry conditions are seen lasting “for longer than previously expected,” Moody’s said in a statement on Friday. Lower nitrogen prices and new capacity in North America is seen pressuring the company’s credit. A further reduction of as much as two levels is possible, and CF’s actions to manage through the weak operating environment are under review, Moody’s said.

“While Moody’s had anticipated that nitrogen fertilizer prices would decline as new capacity expansions at CF and other producers come on line in 2016 and 2017, the low prices over the past several months have persisted far longer than previously anticipated,” Moody’s said. “The negative impact of weaker prices and volumes will likely cause CF’s credit metrics to well exceed Moody’s prior estimates.”

CF shares slid 3.2 percent to $22.30 at 2:10 p.m. in New York, on pace for a 6.9 percent drop this week. The stock is down 45 percent this year.

Spot prices for urea at the U.S. Gulf tumbled to a 12-year low in recent months, according to Green Markets data. Global nitrogen capacity is seen continuing to climb, keeping pressure on prices into 2017, according to a Bloomberg Intelligence report. A slump in grain futures has added to weakness in fertilizer prices, with corn futures on pace for a fourth straight annual decline.

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