Fitch Rts Mosaic's Proposed Sr. Unsec Notes & Sr. Sec Term Loans 'BB/BB+'; Remains On Watch Evolving.

CHICAGO -- Fitch assigns a 'BB' rating to The Mosaic Company's (Mosaic) proposed senior unsecured notes due 2014 and 2016 and a 'BB+' rating to the company's proposed senior secured term loans. These ratings affect approximately $950 million of new senior notes and $1.05 billion of new term loans.

Mosaic's ratings remain on Rating Watch Evolving, where they were originally placed in July 2006 in anticipation of a potential change in capital structure associated with the credit facility's 2008 Senior Notes Refinancing Condition. The ratings will remain on Evolving Watch until the closing of Mosaic's refinancing transactions, at which time Fitch would likely affirm and remove Mosaic's 'BB-' Issuer Default Rating (IDR) from Watch. The Rating Outlook would then be Stable. Specifically, Fitch anticipates that the following ratings changes would be necessary upon the closing of the refinancing.

--Affirm The Mosaic Company IDR at 'BB-'

--Affirm The Mosaic Company senior secured revolver rating at 'BB+'

--Affirm Mosaic Global Holdings IDR at 'BB-'

--Affirm Mosaic Global Holdings senior unsecured notes and debentures (without subsidiary guarantees) rating at 'BB-'

--Withdraw Mosaic Global Holdings senior secured term loan rating of 'BB+'

--Withdraw Mosaic Global Holdings senior unsecured notes (with subsidiary guarantees) rating of 'BB'

--Withdraw Phosphate Acquisition Partnership LP IDR of 'BB-'

--Withdraw Phosphate Acquisition Partnership LP senior secured note rating of 'BB-'

--Assign The Mosaic Company senior secured term loans rating at 'BB+'

--Assign The Mosaic Company senior unsecured notes (with subsidiary guarantees) rating at 'BB'

--Assign Mosaic Colonsay ULC IDR at 'BB-'

--Assign Mosaic Colonsay ULC senior secured term loan rating at 'BB+'.

The refinancing, once complete, is expected to simplify the debt structure, reduce annual cash interest expense, extend maturities, and remove the possibility of default related to the credit facility's 2008 Senior Notes Refinancing Condition. However, senior secured bank debt and total debt are expected to increase as a result of the refinancing transactions.

An IDR of 'BB-' for Mosaic and its issuing subsidiaries reflects the company's good market positions in the global potash and phosphate markets; and its improving earnings profile. However, the ratings continue to be tempered by Mosaic's high debt level and modest cash flow. Due to low free cash flow, Mosaic has not been able to reduce debt since the combination of IMC Global Inc. with Cargill's crop nutrition business in 2004. Mosaic's debt level stood at nearly $2.6 billion at the end of August 2006. Fitch anticipates an improvement in cash flow over the following twelve months as changes to the phosphate cost structure become apparent; however, the amount of cash flow improvement is uncertain. Additionally, market dynamics are favoring an increase in domestic fertilizer demand next spring while tightening global potash supply could support higher pricing. These factors could boost Mosaic's earnings and cash flow near-term. Fitch forecasts that Mosaic's operating EBITDA-to-gross interest expense could remain just under 4.0 times (x) while total debt-to-operating EBITDA declines to 3.5x for its fiscal year 2007 with modest earnings improvement, stronger cash flow and some debt reduction.

The 'BB+' rating on Mosaic's proposed senior secured term loans reflects the superior collateral coverage and likelihood of principal recovery in a liquidation scenario. The rating is equal to that of Mosaic's existing revolver which would share in the same collateral package.

The 'BB' rating on Mosaic's proposed senior unsecured notes is one notch higher that the IDR of 'BB-' due primarily to the notes' guarantees from domestic and certain foreign subsidiaries. The proposed rating also reflects the new notes senior unsecured position relative to a substantial amount of senior secured debt upon the closing of the refinancing.

The IDR of 'BB-' at Mosaic Colonsay reflects its position as a wholly-owned subsidiary of Mosaic. The 'BB+' rating on Mosaic Colonsay's existing term loan reflects its collateral position. This term loan would share the credit facility collateral with the revolver and new term loans at parent Mosaic.

The ratings could change if the final terms of the amended and restated credit agreement and new senior notes differ materially from the preliminary terms and conditions considered for the ratings.

The Mosaic Company is one of the largest global suppliers of phosphate and potash fertilizers. Mosaic earned approximately $655.9 million in EBITDA on $5.2 billion in revenue LTM Aug. 31, 2006; the company had $2.6 billion in debt at that time.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.