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Cf Industries Credit Agreement
Our BB rating reflects CF`s high commercial risk and moderate risk profiles for cash buffer, credit score and distance from default. The downgrading of the credit rating to BB two and a half years ago is due to the company`s unwillingness to take pro-credit measures at a time when nitrogen market conditions are weak, the change in its fiscal policy that brought secured debt to its capital structure and the reduction in liquidity generated by a reduced revolving credit facility, guarantee. CF`s rating takes into account the company`s leverage effect and its somewhat aggressive capital allocation policy. As the largest nitrogen producer in North America, CF is an inexpensive manufacturer that has set up an extensive efficient transportation network to efficiently serve the U.S. corn belt. However, cf does not have an economic gap, as attributed by Morningstar`s equity research group, as operating results, despite their low cost profile, have eased in recent years due to further capacity increases in the sector. Prior to 2016, CF made a strong commitment to repatriate capital to shareholders. Since the beginning of 2011, it had repaid more than $5 billion in share buybacks. This allocation policy, along with expansion investments from 2014 to 2016, has led CF to issue $4 billion in new bonds since early 2013. The additional debt, combined with lower nitrogen prices, had a negative impact on CF`s results in 2016 and 2017. As of March 31, we estimate that debt is approximately 3 times LTM per EBITDA on a gross basis.
Looking ahead, we expect a positive generation of free cash flow close to $1 billion per year. Rule 17g-7(a) of the Securities Exchange Act of 1934 requires that certain information be made when a rating action is taken. In this context, a credit rating measure is considered to be (1) the publication of an expected or provisional credit rating assigned to a debtor or security prior to the publication of an initial rating; (2) a first classification; (3) a downgrade or downgrade of an existing rating; and (4) confirmation or withdrawal of an existing rating if the confirmation or withdrawal results from a review of the rating assigned to the debtor or security, using the applicable procedures and methods of the company`s securities to determine credit ratings. Prior to 2010, CF had no long-term debt. But following the acquisition of Terra and management`s decision to change the company`s capital structure, the company`s total debt had risen to $US 5.8 billion by the end of 2017. The increase in debt fell into a period of growth investment and large share buybacks. Debt stood at $4.75 billion at the end of March and consisted of both covered and unsecured bonds. . . .