OREANDA-NEWS. Fitch Ratings has affirmed The Mosaic Company's (Mosaic) long-term IDR and senior unsecured debt ratings at 'BBB'. Roughly $5.3 billion in aggregate principal amount of debt and commitments under the revolving credit are affected by this action. A complete list of rating actions follows at the end of this release.

Mosaic's ratings reflect the company's generally conservative financial management, strong liquidity, and robust cash flow from operations. The ratings consider the company's position as one of the world's largest fertilizer producers with good cost control, advantaged geography, and long mine lives taken together with overcapacity in key markets and soft agricultural commodities prices.

Mosaic and others have curtailed production to clear channel inventories, but North American potash competition could intensify when K&S' Legacy potash mine begins production in 2017.

The Rating Outlook is Stable

KEY RATING DRIVERS

Well-Defined, Public Financial Policy: Mosaic has a leverage target of adjusted debt to adjusted EBITDA of between 1.5x and 2x. Adjusted debt is presented as total debt plus unfunded pension and postretirement obligations plus lease obligations (calculated as 6 times annual rental expense) plus contingent debt (guarantees for joint-venture obligations). Additionally, Mosaic has a target liquidity of $2.5 billion comprised of availability under its $1.5 billion revolving credit facility and its cash balances. Fitch believes the policy mitigates the risk to cash flows from commodity price exposure and weather patterns.

Share Repurchase Authorization: In May 2015, the company's board of directors authorized $1.5 billion share repurchase program. As of Sept. 30, 2015, about $925.1 million remained under the program.

Excess Potash Capacity: New capacity additions amid soft demand will require discipline to maintain pricing. The Food and Agriculture Organization of the United Nations (FAO) expects capacity to increase by 10.2 million tonnes to 60.7 million tonnes between 2014 and 2018. The FAO expects potash demand to grow by 3.5 million tonnes to 34.5 million tonnes over the same period.

Large, Global Presence: Mosaic is the largest integrated phosphate producer in the world accounting for about 14% of world production and 71% of North American production. The company is the fourth largest potash producer accounting for about 14% of world production and 44% of North American production. Mosaic has extensive distribution facilities in North America. International distribution activities include blending, bagging or production facilities in Brazil, China, India and Paraguay. Mosaic sells to customers in approximately 40 countries. While markets are concentrated, pricing power depends on discipline from former BPC members in potash producers and OCP for phosphate rock.

Substantial Reserves and Long-Lived Mines: At Dec. 31, 2014, Mosaic had 588 million tonnes of phosphate reserves. At current annual capacity of 17 million tonnes, this equates to over 35 years of mine life. The company had 2 billion tonnes of potash reserves. At current annual peak capacity of 12.5 million tonnes of production, this equates to over 150 years of mine life.

Cost Position: Potash costs, on a delivered basis, are above global average given the need to manage brine inflow at the Esterhazy mine and freight to Asia. The company expects to complete the K3 shaft in 2017 and mitigate the risk from current and future brine inflows by 2024. Phosphate costs are in the first quartile of the global cost curve. LTM Sept. 30, 2015 segment EBITDA for each of potash and phosphate fertilizers was $1.1 billion.

For the LTM period ended Sept. 30, 2015, Mosaic earned EBITDA of $2.2 billion and generated cash flow from operations after dividends and capital expenditures (FCF) of $567 million. Total Debt to operating EBITDA was 1.7x and FFO adjusted leverage was 2.1x for the LTM period ending Sept. 30, 2015. Fitch expects roughly $2 billion in EBITDA for 2016 and marginal FCF in 2016 and 2017.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for Mosaic include:
--2016 Realized MOP prices of $216/tonne, DAP prices of $415/tonne;
--Volumes within guidance ranges;
--Capital expenditures within guidance range;
--$650 million in cash used to fund the asset retirement obligations;
--Share repurchases managed within the liquidity target.

RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead to a positive rating action include:

--Consistent FCF generation;
--Leverage managed at the lower end of management's target range of 1.5x- 2.0x;
--Liquidity managed at $2.5 billion or above.

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

--Sustained negative FCF;
--Total liquidity less than $1.75 billion;
--Total debt-to-EBITDA anticipated to be above 2.5x on a sustained basis.

LIQUIDITY
Substantial Liquidity: At Sept. 30, 2015, the company had cash and equivalents of $1.3 billion and $1.48 billion available under the $1.5 billion credit facility that matures in December 2018.

Cash at Sept. 30, 2015 is exclusive of $851.6 million of restricted cash including the $630 million that is committed to be placed in trust to support certain estimated future asset retirement obligations. Of total cash, $1.8 billion was held by non-U.S. subsidiaries.

Mosaic's revolver and term loans allow for a maximum total debt to EBITDA of 3.5x and a minimum interest coverage of 3.0x. Fitch believes Mosaic will operate well within compliance of its covenants.

Near-term scheduled maturities of debt over the next five years are estimated at $44 million in 2016, $366 million in 2017, $132 million in 2018; and $316 million in 2019. Capital expenditure guidance is between $1.1 billion and $1.2 billion for 2015 and with levels expected to peak in 2016 near the high end of that guidance. Fitch estimates annual dividends absent further repurchases would run $388 million annually and interest expenses run about $161 million annually.

Note covenants restrictions are light including standard limitations on liens and sale-leasebacks.

FULL LIST OF RATING ACTIONS

Fitch affirms Mosaic's ratings as follows:

The Mosaic Company (parent)
--Long-term IDR at 'BBB';
--Senior unsecured revolver at 'BBB';
--Senior unsecured term loan facility at 'BBB';
--Senior unsecured notes at 'BBB'.

Mosaic Global Holdings Inc.
--Long-term IDR at 'BBB';
--Senior unsecured debentures at 'BBB'.