Moody's may cut BHP Billiton

Moody's Investors Service said it placed the A1 senior unsecured long term ratings of BHP Billiton Ltd. and its guaranteed subsidiaries on review for possible downgrade with its prime-1 short-term rating unaffected and affirmed.

The review follows news that the company plans an all-cash $38.5 billion take-over offer of Potash Corp. of Saskatchewan, which is rated Baa1.

The downgrade review reflects the substantial increase in debt to fund the transaction, Moody's said, and considers the possibility of a higher offer being made for the target company.

BHP Billiton currently has high levels of liquidity and a strong balance sheet with substantial debt capacity, the agency said.

Nevertheless, such a large transaction could result in the group's financial leverage rising to about 1.5x to 1.6x in 2011, thereby exceeding the tolerance level set for the A1 rating, Moody's said.

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