Moody’s Investors Service assigned A3 ratings to up to $2 billion issued to DuPont Co. for pension purposes.
The rating came with a negative outlook According to Moody’s will be obligations of DuPont only and will not be guaranteed by, or become obligations of, DowDuPont, The Dow Chemical Company or any of Dow’s subsidiaries.
The ratings led to concerns within the large community of DuPont pensioners in the region.
The bonds will have a mandatory redemption triggered at the separation of the DowDuPont agricultural chemicals (AgCo) and seeds business or the Specialty Products business but will not be triggered by the separation of the Performance Materials business.
“We expect AgCo to be the entity supporting the DuPont bonds, but regardless of the entity, DuPont will be a smaller less diversified company on a post-spin basis. Also, execution risk during the merger phase is meaningful due to the complexities of combining, restructuring and realizing synergies within an entity that will have over $70 billion in combined revenues,” a Moody’s release stated.
In addition, details with respect to each entity’s balance sheet, pension liabilities and financial policies are still undefined, although DuPont maintains in its filings that the Ag spinco is intended to have credit metrics and a credit profile consistent with DuPont as of December 31, 2015, Moody’s noted.
The negative outlook reflects the lack of details regarding the legal structure post-merger and the financial policies and balance sheet targets on a post-split basis, Moody’s continued. “The negative outlook also reflects the fact that that DuPont’s metrics are currently weak for the A3 category, as well as the complexities of combining and restructuring the agriculture and specialty businesses, which come at a time when their respective industries face industry or macro headwinds.”
