S&P: Inco, Falconbridge on developing watch

Standard & Poor's said it revised the CreditWatch implications on Inco Ltd. and Falconbridge Ltd. to developing from positive after Phelps Dodge Corp. (BBB/Watch negative/A-2) announced an increase in the debt-financed cash consideration for the two companies.

Because there are multiple competing bids outstanding, both friendly and hostile, for Inco and Falconbridge, the ratings on the companies are exposed to several potential outcomes, the agency said, including the companies' BB+ subordinated debt rating.

S&P said that the ratings on Inco could be raised if it is acquired by Teck Cominco, but the outcome will depend on Teck Cominco's more aggressive capital structure in light of currently high commodity prices, significantly increased revenue and operating diversity, large development plans and high dividend payout.

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