Moody's puts DuPont ratings under review after Danisco move

11 January 2011 02:15  [Source: ICIS news]

SINGAPORE (ICIS)--Moody’s Investors Services has placed the A2/Prime-1 ratings of chemicals major DuPont under review after the company announced an agreement to acquire Denmark’s Danisco, the ratings agency said late on Monday.

DuPont said on 10 January that it aims to acquire Danisco in an all cash offer for a transaction valued at around $6.3bn (€4.85bn) including assumed debt.

“If the transaction goes forward as proposed it is likely that DuPont's ratings could be downgraded by one or two notches,” Moody’s said in a investors note.

The acquisition has already brought about concerns about the price paid for the acquisition and the resulting dilution to earnings.

But DuPont executive vice president and chief financial officer Nicholas Fanandakis said during a webcast that the company would strive to minimise the earnings impact.

The review for possible downgrade of DuPont's ratings reflects a shift in strategic and financial policies at DuPont as indicated by the size of the proposed transaction, the note said.

The use of $3bn of cash to fund a portion of this $6.3 billion acquisition also calls into question Moody's willingness to credit future cash balances for use in net debt ratio analysis, it said.

“Furthermore, DuPont's positioning in the A2 rating category was pressured due to the recent economic downturn, combined with capital spending, increased pension liability, and large dividend,” the note added.

Moody's earlier on 24 November last year affirmed ratings and moved Dupont’s outlook to stable.

($1 = €0.77)

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By: Nurluqman Suratman

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