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S&P rates Xstrata bonds BBB+
Standard & Poor's said it assigned its BBB+ long-term debt rating to the proposed senior unsecured benchmark bonds to be issued by subsidiaries of Switzerland-based mining group Xstrata plc (BBB+/stable/A-2), under its guarantee.
Specifically, S&P said it said it assigned its BBB+ senior unsecured debt rating to proposed bonds, including floating-rate bonds maturing 2009, to be issued by Xstrata Finance (Dubai) Ltd. and guaranteed by Xstrata, Xstrata (Schweiz) AG and Xstrata Finance (Canada) Ltd., Fixed-rate bonds maturing 2011, to be issued by Xstrata Finance (Canada) and guaranteed by Xstrata, Xstrata (Schweiz) and Xstrata Finance (Dubai) and fixed-rate bonds maturing 2016 also issued by Xstrata Finance (Canada) and guaranteed by Xstrata, Xstrata (Schweiz) and Xstrata Finance (Dubai).
Proceeds from the bonds will be used to repay a portion of the debt incurred with the recent acquisition of Canada-based Falconbridge Ltd. (BBB+/stable/A-2) and thereby extend Xstrata's debt maturity profile.
The bonds are rated at the same level as the corporate credit rating on Xstrata, S&P said. The bonds will be subject to a degree of structural subordination due to subsidiary debt located mainly at Falconbridge and operating liabilities located throughout the group, S&P said.
The ratings reflect the group's position as a leading diversified metals and mining group with strong market positions in key commodities, coupled with robust profit margins and strong cash flow generation, S&P said.
These strengths are partially offset by capital-intensive, cyclical and volatile mining industry, along with the group's high exposure to the copper market.
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