Moody's may cut Rio Tinto Group

Moody's Investors Service said it placed the Baa1 senior unsecured ratings for the Rio Tinto Group companies under review for possible downgrade, and affirmed the prime-2 short-term rating for rated entities within the group.

The review follows news that Rio Tinto's board is recommending a strategic alliance with Aluminium Corp. of China, which includes an investment of $12.3 billion and $7.2 billion received by Rio Tinto from a convertible bond issue.

Moody's said it believes that the cash infusion will enable Rio Tinto to significantly reduce debt and meet the 2009 and 2010 maturities under the financing put in place to acquire Alcan (Rio Tinto Alcan) in 2007.

However, given the broad reaching investments across Rio Tinto's key assets, there are uncertainties as to the medium- and long-term impact on Rio Tinto's earnings and cash generation capacity and the actual degree of involvement by Aluminium Corp. in the business, the agency said.

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