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Fitch Places Mosaic's Ratings on Rating Watch Negative.

CHICAGO -- Fitch Ratings has placed the ratings of The Mosaic Company and its issuing subsidiaries on Rating Watch Negative.

Fitch rates Mosaic as follows:

The Mosaic Company

--IDR 'BB-';

--Senior secured revolver rating 'BB+';

--Senior secured term loan rating 'BB+';

--Senior unsecured notes (with subsidiary guarantees) rating 'BB'.

Mosaic Global Holdings

--IDR 'BB-';

--Senior unsecured notes (with subsidiary guarantees) 'BB';

--Senior unsecured notes and debentures (without subsidiary guarantees) rating 'BB-';

Phosphate Acquisition Partnership LP

--IDR 'BB-';

--Senior secured note rating 'BB-'.

Mosaic Colonsay ULC

--IDR 'BB-';

--Senior secured term loan rating 'BB+'.

Mosaic reported a new brine inflow at its Esterhazy, Saskatchewan potash mine this morning which could jeopardize long-term earnings and cash flow. Brine is flowing into a mined-out area at Esterhazy at a rate of 20,000 to 25,000 gallons per minute. Although Mosaic has been managing brine inflow at Esterhazy since 1985, the current rate of inflow is more substantial than before.

The Negative Rating Watch is driven by the potential loss of long-term earnings from Esterhazy if brine inflow mitigation efforts fail. Abandonment of Esterhazy would have a permanent long-term impact on Mosaic's future earnings and cash flow. Earnings from Esterhazy potash are a significant portion of potash segment earnings. Moreover, Mosaic's potash business has been an important and steady source of income for the company as it struggles to improve its phosphates segment profitability and overall company cash flow.

The near-term impact from the flooding is the likely decline in free cash flow available for debt reduction. Mitigation efforts are expected to cost the company $20 million to $40 million in expense, plus some additional capital investment. This unexpected cash use comes at a time when Mosaic is working to improve cash flow and remains highly levered. No insurance receivable is expected to offset expenses related to the mitigation efforts.

Mosaic may have to pursue other options if current mitigation efforts fail to stem or eliminate the new brine inflow. Options include continuing with pumping, grouting, and other measures; conversion to a solution mine; or in the extreme case, abandoning the mine. Abandonment or conversion to a solution mine would affect not only Mosaic, but also Potash Corporation of Saskatchewan which receives a portion of potash mined from its reserves at Esterhazy.

Negative Rating Watch will likely remain in place until resolution to the new brine inflow is better understood.

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, 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.
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Publication:Business Wire
Geographic Code:1CANA
Date:Jan 24, 2007
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