NEW YORK, NEW YORK, U.S. — Moody’s Investors Service on Sept. 4 assigned a Baa2 rating to Bunge Limited Finance Corp.’s $600 million issuance of guaranteed senior unsecured notes due 2023. The company’s rating outlook is negative.

Moody’s said the Baa2 long-term debt rating is supported by a moderate amount of balance sheet debt, a relatively conservative balance sheet, an established position in merchandising agricultural commodities, significant downstream integration into edible oils and meaningful geographic diversity.

“Bunge has a leading market share in agricultural commodity trading in Brazil and has a substantial investment in logistics, which allow it to minimize export delays,” Moody’s said. “Increased farm storage capacity in Brazil (this is also an issue in the U.S. but has had a smaller impact on Bunge) is creating more flexibility for farmers in timing their crop sales.”

The rating’s agency said Bunge’s credit metrics between 2013 and 2016 provided support to the company’s Baa2 rating, but since that time EBITDA has declined sharply. And while Moody’s said it expects a stronger second half of 2018 due to the expansion of global crush margins, the company’s ability to generate full-year EBITDA of at least $1.9 billion is less certain.

“The failure to return EBITDA to this level and demonstrate more consistent growth in EBITDA would also increase event risk as a number of Bunge’s competitors have expressed interest in consolidation to improve profitability,” Moody’s noted.

Meanwhile, the “negative” outlook that Moody’s has assigned to Bunge reflects the increase in debt at a time when financial performance has been unusually weak.

“Failure to return credit metrics to prior levels (e.g. $1.9 billion in pro forma EBITDA, including Loders Croklaan and free cash flow of at least $300 million, assuming stable crop prices) could result in a downgrade,” Moody’s said. “An upgrade to the rating is remote at this time given its weak financial performance and the expected increase in debt. However, if Net Debt/ EBITDA is below 2.0x and Funds From Operations/Net Debt is above 30% for a sustained period, we could upgrade Bunge’s ratings.”