Bunge issues US$1b debt notes for purchase of IOI Loders Croklaan

UALA LUMPUR: Bunge Ltd’s unit Bunge Limited Finance Corp. has issued US$1bil of debt notes for the purchase of a 70% stake in IOI Loders Croklaan fron IOI Corporation Bhd .

According to a statement posted on its website, Bunge Limited had priced a public offering of US$400mil aggregate principal amount of 3% senior notes due 2022 and US$600mil aggregate principal amount of 3.75% senior notes due 2027.

 The senior notes will be guaranteed by Bunge Limited.The transaction is expected to close on Sept 25, 2017.
“Bunge Limited intends to use the net proceeds from this offering to finance its previously announced acquisition of a 70% ownership interest in IOI Loders Croklaan.  

“Pending the closing of the acquisition, Bunge intends to use the proceeds to repay outstanding indebtedness,” it said.

Last week, IOI Corporation announced the proposed disposal of a 70% controlling stake in IOI’s Netherlands-based palm oil refinery IOI Loders Croklaan Group BV for RM3.94bil to Bunge while retaining a 30% stake in Loders.

Loders is one of Europe’s leading global suppliers of specialty oils and fats to the processed food industry. IOI bought this business from Unilever back in November 2002 for RM814mil. 

Moody’s Investors Service cut its outlook for Bunge Ltd oand cautioned that without much improved earnings it could cut the US agribusiness’ credit rating to just a step above junk status.

The agency revised Bunge’s outlook from stable to negative after it opened a US$900mil credit facility to help fund a deal for  the IOI Loders Croklaan stake.

Moody’s maintained Bunge’s Baa2 long-term debt rating, but warned that without improved operating performance and cash flow, the company risks a downgrade to Baa3, one notch above junk.
However, ratings agencies Fitch and S&P Global said  their Bunge ratings remain unchanged after the deal, citing expectations for an earnings turnaround through 2018.

S&P said it expects Bunge’s debt-to-EBITDA ratio by late 2018 to fall below the three times, a critical level above which the ratings agency could consider a downgrade.

Fitch anticipates Bunge’s gross leverage, or debt-to-EBITDA, would remain above the mid-3x level this year before moderating into 2018 with an anticipated rebound in earnings.