Reported by: Eric CRWE Newswire Middle East correspondent
Potash Corp’s (NYSE: POT) yield on debt (bonds) worth $500 million dropped to 3.645 percent from 4.875 percent as the bond value surged by $0.86 to $1.09 according to Financial Industry Regulatory Authority.
Though Potash has rejected a bid of $130 per share by BHP Billiton, its debt investors are of the opinion that a successful acquisition of Potash would increase its credit rating to same level as BHP Billiton.
Based in Melbourne, Australia BHP Billiton is rated is A1 by Moody’s which is three times higher than Potash’s ranking of Baa1
Ric Palombi manager at Mclean & Partners in Calgary commented, “BHP has a solid balance sheet, if Potash comes under BHP’s umbrella, that’s positive for Potash’s debt.”
Potash has $2.72 billion of long term debt on its books as on June 30th, 2010 which is to be utilized for extraction of potassium based mineral from capacity mines at Saskatchewan and New Brunswick. Other than long term debt of $2.72 billion the company also issued long term notes worth $500 million with discount rate of 3.75 percent in September.
It is believed that tighter bond spreads between Potash and BHP is the only factor that could facilitate a merger between two mining giants. Bill Doyle Potash’s chief executive officer referred to BHP bid price as “highly opportunistic” but on the other hand also stated, “We’re not opposed to a sale of the company, but we certainly are opposed to someone stealing the company.”
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