Deere & Co.'s Proposed Senior Unsecured Notes Rated 'A'

NEW YORK (S&P Global Ratings) March 25, 2020--S&P Global Ratings today assigned its 'A' issue-level rating to Moline, Ill.-based Deere & Co.'s (Deere) proposed U.S. dollar-denominated senior unsecured notes. We expect the company to issue the notes in three tranches with 5-year, 10-year, and 30-year maturities. The notes will rank equally with all of Deere's unsecured and unsubordinated debt. The company plans to use the net proceeds from this offering for general corporate purposes. Specifically, we believe that Deere will use the net proceeds to add incremental liquidity to its balance sheet to address any temporary intra-year working capital needs that may arise from potential supply chain disruptions.
All of our ratings on Deere, including our 'A/A-1' issuer credit rating, remain unchanged.
We expect that Deere will face challenging demand conditions in its agricultural and construction end markets in the near-term because we believe that a global macroeconomic recession will materially dampen the demand for heavy capital equipment in calendar year 2020. In addition, we believe the company's margins will likely decline in its fiscal year 2020 (ending Oct. 31, 2020) due to lower production volumes and incremental operating expenses stemming from the effects of the coronavirus pandemic. Still, we expect Deere to maintain sufficient liquidity to meet its obligations. Although we are uncertain of the magnitude and duration of the impending global recession, Deere's earnings have historically rebounded relatively quickly following a cyclical downturn. We will monitor the effects of the current macroeconomic slowdown on the company's order books and credit ratios for the next 12-24 months.
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