Moody's Investors Service has assigned a Ba1 rating to Duluth, Ga.-based AGCO Corporation's $350 million secured revolving credit facility. The loan is rated a notch higher than the senior implied rating, on the expectation that the loan is secured against a security interest in the majority of AGCO's U.S., Canadian and U.K. assets, and a pledge of the outstanding capital stock of the material direct and indirect subsidiaries of the company.
The credit is intended for refinancing debt and the $247 million acquisition of Ag-Chem Equipment Co., Inc., the off-road heavy equipment manufacturer and distributor, which is awaiting shareholder approval. The $350 million credit is reportedly coming to market with a bank meeting on April 23. Priced at LIBOR plus 23/4 %, the credit is led by Rabobank, with Sun Trust Bank, Credit Suisse First Boston, CoBank and Bear Stearns as co-arrangers.
"The merger makes an awful lot of sense and though in the immediate future there will be an assumption of debt, the benefits will be seen next year," noted Bruce Clark, senior v.p., Moody's. "AGCO has a big position in the U.S., pretty broad geographic reach, which lowers vulnerability to the farm sector's cyclical nature, and the merger will lead to considerable operating synergies," he added. The prolonged depression in the North American market has affected the company's operating performance and financial flexibility, with weakness in the sector set to continue, including demand in AGCO's important Western European markets.