Moody's rates Leighton convertible Baa2

Moody's Investors Service said it assigned an issuer rating of Baa1 to Leighton Holdings Ltd. and assigned a rating of Baa2 to Leighton's A$200 million convertible subordinated notes issue.

The outlook is stable.

Moody's said its ratings reflects the group's: 1) strong position in the Australian construction industry, underpinned by its ownership of three leading contractors - Thiess, John Holland and Leighton Contractors - which contribute to an incomparable track record in Australia for successfully completing contracts; 2) diversity of activity; 3) minimal usage of debt funding with sound cash reserves underpinning liquidity; and 4) robust book of contracted work.

At the same time, Moody's said, the ratings consider: 1) the significant geographic and industry concentration risk; 2) increasing operational risk; 3) developing risk management systems with reliance on key individuals to overview operating risk; and 4) evidence of shareholder friendly financial policies, with a dividend payout ratio of 60% to 70% (though this was increased to over 100% in 2004).

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