S&P: Xstrata Queensland on watch

Standard & Poor's said it placed its BBB+ long-term corporate credit rating on Xstrata Queensland Ltd. on CreditWatch with negative implications.

S&P noted that this follows the announcement by the company's parent Xstrata plc of an unsolicited $14.6 billion all-cash offer for the approximate 80% stake in Falconbridge Ltd. (BBB-/Watch developing/A-3) that it does not already own.

The CreditWatch placement reflects the agency's expectation that the financial risk profile of the combined group could be significantly weakened should the transaction proceed on the proposed basis.

The rating on Xstrata Queensland reflects the business and financial risk profiles of and implicit support from Xstrata, the agency said, adding that the current rating is characterized by a satisfactory business risk profile and an intermediate financial risk profile.

positive rating factors include leading market positions in coal mining and ferroalloys, low-cost assets, average commodity diversification and strong credit ratios, S&P said.

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