Moody's affirms Inco, Falconbridge

Moody's Investors Service said it affirmed the Baa3 senior unsecured debt ratings of both Inco Ltd. and Falconbridge Ltd. following an announcement that Inco will offer to purchase up to 100% of Falconbridge for $10.9 billion.

Ratings affirmed include Inco Ltd.'s $1.1 billion senior unsecured debt at Baa3, $438 million senior unsecured zero-coupon debt due 2021 at Baa3, $240 million convertible debt due 2023 at Baa3 and $220 million convertible subordinated debt due 2052 at Ba1, along with Falconbridge Ltd.'s $2.4 billion senior unsecured debt at Baa3.

The ratings affirmation reflect the strong cash flow and asset positions of the combined entities, Inco's intention to reduce debt by $2 billion in two years following the transaction and a view that metals prices will remain sufficiently robust, Moody's said.

The affirmation also reflects that Inco's and Falconbridge's debt will rank as pari-passu obligations of Inco upon conclusion of the transaction.

The outlook is stable.

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