UPDATE: S&P Cuts FMC Corp. (FMC) to 'BBB+'; Outlook Stable

(Updated - February 9, 2015 12:16 PM EST)

Standard & Poor's Ratings Services today lowered its long-term corporate credit rating on Philadelphia-based FMC Corp. (NYSE: FMC) to 'BBB+' from 'A-'. At the same time, we removed the ratings from CreditWatch, where we had placed them with negative implications on Sept. 9, 2014. The outlook is stable.

At the same time we affirmed our 'A-2' short-term corporate credit rating and 'A-2' commercial paper rating.

We also lowered the ratings on FMC's senior unsecured debt to 'BBB+' from 'A-' and removed them from CreditWatch.

"The downgrade reflects FMC's increased concentration in the currently soft agricultural chemicals market, recent slower growth trends in the company's remaining businesses, and a meaningful increase in leverage to fund the Cheminova acquisition," said Standard & Poor's credit analyst Seamus Ryan. "Although we expect FMC will use the net proceeds from the Alkali Chemicals sale to offset the amount of debt required to fund the Cheminova acquisition, we believe leverage will increase meaningfully from year-end 2014 once both transactions close," said Mr. Ryan.

The ratings on FMC reflect our assessment of the company's business risk profile as "strong" and its financial risk profile as "intermediate." We consider FMC's liquidity to be "strong," given the company's cash-generating capability and commercial paper availability, with cash sources likely to exceed cash uses by at least 1.5x for the next two years. We also expect sources to exceed uses even if EBITDA declines by 30%.

The stable outlook reflects our expectations that FMC will use the net proceeds from the Alkali Chemicals sale to offset the debt required for the Cheminova acquisition and that the company will take steps to improve cash flow and reduce leverage over the next year. We believe the company's financial policies will support an improvement in credit measures to be in line with our expectations, including FFO to debt above 30%, over the next two years.

We could lower the ratings on FMC if prolonged weakness in the agricultural chemicals market, difficulties integrating the Cheminova acquisition, or additional large debt-funded acquisitions leads to FFO to debt below 30% beyond 2015. We could also lower ratings if the company increases cash outlays for capital spending or share repurchases, thereby limiting its ability to reduce leverage over the next two years.

We could raise the ratings on FMC if the company experiences a resurgence in organic revenue growth or it rapidly improves earnings and cash flows at Cheminova such that we expect FFO to debt to surpass 40% on a sustained basis. We could also raise ratings if prudently funded investments reduce the concentration of the business while maintaining strong operating efficiency and profitability. Such a scenario could lead us to reassess the relative strength of the company's "strong" business risk profile.

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