S&P affirms Xstrata, Falconbridge

Standard & Poor's said it affirmed its BBB+ long-term and A-2 short-term corporate credit ratings on Xstrata plc and Falconbridge Ltd. and removed them from CreditWatch with negative implications.

The outlook is stable.

The agency said that this follows today's announcement by Xstrata that it will raise $5.5 billion of new equity to partly refinance the additional debt incurred in acquiring the 80% of Falconbridge that it did not already own.

At the same time, the BBB+ long-term corporate credit rating on Xstrata Queensland Ltd. was affirmed and removed from CreditWatch with negative implications, where it was placed on May 17, following Xstrata's unsolicited takeover offer for Falconbridge. The outlook is stable.

In addition, S&P said it affirmed its BBB+ senior unsecured debt rating on Xstrata's up to five-year multicurrency $9.5 billion term and revolving credit facility, which was partly used by Xstrata to finance the acquisition of Falconbridge.

S&P added that Xstrata currently benefits from exceptional market conditions, which are strongly supporting its credit profile, but the group has reduced its financial flexibility for weathering the next downturn by raising less new equity.

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