HG bonds: Cargill prints $1.5B offering for refinancing purposes; terms

Cargill Inc. today completed a $1.5 billion, three-part offering, evenly split across 2024, 2026, and 2031 notes.

Proceeds will be used for general corporate purposes, including to repay the company's upcoming maturities, according to the rating agencies. Of note, Cargill has various long-term maturities due this year, starting with $500 million of 3.05% notes due in April, followed by $677 million of 4.307% notes due in May, and $500 million of 3.25% notes due in November, according to S&P Capital IQ.

Cargill last tapped the market in April 2020, when it placed a $1.5 billion, two-part offering, evenly split across 1.375% three-year notes due July 23, 2023 at T+115, or 1.408%; and 2.125% 10-year notes due April 23, 2030 at T+150, or 2.138%. For reference, the 2030 issue traded a week ago at a G-spread of 68 bps.

Privately held Cargill, based in Minneapolis, produces and markets food, agricultural, financial, and industrial products and services.

Cargill's ratings profile includes stable outlooks all around. Rating agencies on Jan. 28 assigned A/A2/A grades to the new bond placement.

S&P Global Ratings noted that Cargill's operating performance through the first half of fiscal-year 2021 (ended Nov. 30, 2020) was better than expected, with adjusted EBITDA increasing by just over 50% year over year, primarily due to strong beef processing margins.

"Cargill is currently operating with historically low leverage because it typically funds its capital investments, acquisitions, and dividends with internally generated cash, which will keep its debt balances relatively low despite a possible pick up in its acquisition pace. We estimate the company's debt to EBITDA for the 12 months ended Nov. 30, 2020, declined to about 0.7x from 1.0x a year earlier. In addition, we believe it may resume its measured pace of undertaking midsize acquisitions (typically less than $2 billion) prior to the pandemic over the next one to two years," the agency said today.

Moody's noted that today's offering is consistent with the expected increase in working capital requirements after the run-up in crop prices and related commodities in 2020, as well as expected volume increases in 2021. "Cargill's credit profile is constrained by earnings volatility, exposure to potentially large changes in working capital based on volatility in commodity prices, exposure to basis risk on many derivatives, and the confidence sensitive nature of the industry (counterparty access and trade credit)," Moody's said today.

Fitch also affirmed its ratings and outlook last week. "Cargill's financial profile is also strongly supported by abundant liquidity, reflecting robust cash, cash equivalents and short-term investments; significant availability under committed credit lines; and liquid readily marketable inventories (RMI). Fitch expects RMI-adjusted leverage, defined as total debt with equity credit less RMI/EBITDA less RMI interest, to be below 1.0x in fiscal 2021, reflecting strong EBITDA growth and more normalized debt levels," Fitch said today. Terms: