Rio Tinto's senior unsecured ratings cut to 'A3' with stable outlook - Moody's |
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Thu, 25 Oct 2007 06:26
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MUMBAI (Thomson Financial) - Moody's Investors Service said it has downgraded the senior unsecured ratings of Rio Tinto and entities within its group to 'A3' from 'Aa3' with a stable outlook after the mining group said it has received sufficient stock tenders from Canadian aluminium group Alcan Inc's shareholders to assume control of that company.The company on Wednesday said it now holds about 79.41 pct of Alcan.The downward action on Rio Tinto is prompted by the use of significant debt to finance the acquisition, Moody's said.The agency also downgraded short-term ratings of the rated entities within Rio Tinto to 'Prime-2' from 'Prime-1'.However, it upgraded senior unsecured ratings of Alcan to 'A3' from 'Baa1', equalising them with those of the Rio Tinto group. Further, it confirmed Alcan's 'Prime-2' short-term rating, saying it will likely withdraw the rating once the company's short-term programmes are terminated as future short-term issuance will be within the Rio Tinto group.While Rio Tinto has solid a credit profile characterized by very low leverage and strong coverage ratios, the near term credit profile of the combined group is weakly positioned in the 'A3' rating category, Moody's said.However, the rating recognizes Rio Tinto's commitment to use the proceeds from the sale of Alcan's packaging business, as well as non-core assets within the Rio Tinto portfolio collectively estimated to exceed 10 bln usd to significantly reduce outstanding debt over the next 12 to 15 months.Also, given the company's enhanced position within the aluminium industry, leading positions within the copper and iron ore industries, and expectations of continued strength in the metals sector, Moody's said it expects it to continue to generate free cash flow for debt reduction.Moody's further said Rio Tinto's rating is also underpinned by its strong operating profile, as the newly enlarged group is expected to enjoy leading global positions in all of its major commodity segments, especially aluminium, where it is now the largest global producer at around 4.4 million tonnes per annum.TFN.newsdesk@thomson.comapm/manCOPYRIGHTCopyright Thomson Financial News Limited 2007. All rights reserved.The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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