CF Industries Cut to Junk by S&P Amid Fertilizer Price Slump

  • S&P cites ‘ongoing depressed pricing’ for nitrogen fertilizer
  • Moody’s last week also cut its credit rating on the company

CF Industries Holdings Inc., the U.S. nitrogen-fertilizer maker that’s grappling with slumping crop-chemical prices, had its credit rating cut to junk by S&P Global Ratings.

S&P lowered the rating to BB+ from BBB-, the ratings company said in a statement on Monday. S&P said its outlook for CF’s rating is negative, which reflects expectations that the company’s credit measures will be strained for at least the next 12 months.

“The lower ratings reflect our view that ongoing depressed pricing in the nitrogen fertilizer sector will weaken credit metrics to levels that are not appropriate at the previous ratings,” S&P said in the statement. “We do not anticipate any meaningful pricing recovery in 2017.”

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 on pace for a fourth straight annual decline.

Last week, Moody’s Investors Service also lowered its rating on CF, amid concerns that low fertilizer prices will last for longer than previously expected. Moody’s placed the company under review for further reductions and said it may be lowered to a junk rating.

CF spokesman Chris Close declined to comment.

The company’s $750 million of 5.375 percent notes coming due in 2044 plunged 6.2 cents to 85.5 cents on the dollar at 4:34 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The company has $5.6 billion of long-term debt, according to an Aug. 4 regulatory filing, with the first portion of the debt stack coming due in 2018, data show.

— With assistance by Sridhar Natarajan

    Before it's here, it's on the Bloomberg Terminal.