Shares in Terra Nitrogen pulled out of their nosedive after the nitrogen group played down the impact of a credit hole which would be caused by the takeover of its owner, Terra Industries.

Terra Nitrogen said that, after talks with lenders, it believed it would be able to replace a credit facility for $50m, on which the company would be considered to have defaulted if an acquisition of Terra Industries went through.

Terra Nitrogen had furthermore not used the facility for more than five years, and had $81.0m in cash as of the end of last month.

The statement helped Terra Nitrogen shares bounce 5.4% from a 15-month closing low to end at $92.46 in New York.

Bidding war 

Concerns over the potential default sent the stock to $82.48 last week, down 21% since Norway's Yara International three weeks ago unveiled a $4.1bn agreed takeover of Terra Industries.

Rival US fertilizer group CF Industries last week unveiled at $4.7bn deal aimed at splitting up the agreement.

Terra Industries owns 75.1% of Terra Nitrogen, with investment bank Bank of America Merrill Lynch, investment company Bowen, Hanes & Co and Renaissance Technologies among other main shareholders.

UBS 'caution' 

Terra Industries shares have soared on the bid interest, standing at $45.39 on Monday, up by more than one-third since the day before the Yara deal was revealed.

However, a recovery in Yara shares has stalled since CF's bid for fears that the Norwegian group will pay more to ensure it acquires Terra Industries.

UBS analysts last week took Yara off their list of "most preferred" European chemical stocks over fears of a higher offer.

"We believe [Yara] see opportunities in long term low US gas prices, a strengthening nitrogen fertiliser market, and supply chain synergies into the Corn Belt," UBS said.

"We therefore see shares kept down in the short term as the market views the bidding war progression with caution."

Yara shares closed down 1.1% at NOK237.60 in Oslo.