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31 Mar 2004
MOODY'S AFFIRMS RIO TINTO GROUP'S RATINGS (SR. UNSEC AT Aa3); OUTLOOK CHANGED TO STABLE
Approximately $3.0 billion of debt affected
New York, March 31, 2004 -- Moody's Investors Service affirmed the Aa3 senior unsecured rating
and Prime-1 short term rating of the rated entities within the
Rio Tinto group (Rio Tinto) and changed the rating outlook to stable from
Rio Tinto's (Rio) Aa3 rating is based on its portfolio of solid,
low-cost, long life productive assets, together with
its diversity in geographic locations and mineral positions. This
operating diversity, balanced between commodity exposure and negotiated
price exposure, helps limit the affect of cyclical swings in any
particular commodity or the economic impact in any single geographic region.
The rating reflects as well, the substantive earnings and cash flow
generation ability of Rio Tinto's asset base.
The stable outlook considers the meaningful improvement in Rio Tinto's
financial risk profile following the reduction in debt that results from
the sale of its approximate 12% common stock interest in Freeport
McMoRan Copper & Gold (proceeds of approximately $880 million)
as well as from other asset sales that have been executed in 2004 to date.
Moody's estimates that Rio Tinto has received about $1.0
billion in asset monetization proceeds, which would give a pro-forma
debt/capital ratio of 30% at year-end 2003 as compared with
35% actual. The outlook also reflects Moody's expectations
that the group's earnings performance and cash flow generation will
be much more robust in 2004 given the improved operating environment for
most of its core business segments, particularly copper and iron
As a consequence of asset sales proceeds and increased cash flow generation,
Moody's now expects Rio Tinto to be able to cover its increased
capital expenditure program in 2004 and reduce debt. Although currency
pressures are likely to continue, they are not expected to be of
the magnitude experienced in 2003 and metal price appreciation benefits
should be more positive in 2004. Moody's notes that upward
rating movement is unlikely given the cyclical nature of several of Rio's
core business segments and the ongoing need for reinvestment for reserve
replenishment and strategic growth. The rating could be adversely
impacted by a resumption in re-leveraging of the company,
a sustained downward resumption in metal price movement or a significant
and permanent increase in the company's cost base.
Ratings affirmed are:
Rio Tinto Canada Inc.: Aa3 senior unsecured medium term note
program guaranteed by Rio Tinto plc and Rio Tinto Limited, Prime-1
short term rating guaranteed by Rio Tinto plc and Rio Tinto Limited
Rio Tinto (Commercial Paper) Limited: Prime-1 short term
rating, guaranteed by Rio Tinto plc and Rio Tinto Limited
Rio Tinto Finance Limited: Aa3 senior unsecured medium term note
program guaranteed by Rio Tinto plc and Rio Tinto Limited
Rio Tinto Finance (USA) Limited: Aa3 senior unsecured global notes
and global bonds, guaranteed by Rio Tinto plc and Rio Tinto Limited
Rio Tinto America Inc.: Aa3 senior unsecured medium term
note program guaranteed by Rio Tinto plc and Rio Tinto Limited,
Prime-1 short term rating guaranteed by Rio Tinto plc and Rio Tinto
Limited, (P)Aa3 senior unsecured shelf rating, guaranteed
by Rio Tinto plc and Rio Tinto Limited
U. S. Borax Inc.: Prime-1 short term
rating guaranteed by Rio Tinto plc and Rio Tinto Limited
Rio Tinto Finance plc: Aa3 senior unsecured medium term note program
guaranteed by Rio Tinto plc and Rio Tinto Limited, Prime-1
short term rating guaranteed by Rio Tinto plc and Rio Tinto Limited
Headquartered in London, England, Rio Tinto operates through
six key product groups: iron ore group, energy group (thermal
and coking coal), industrial minerals group, aluminum group,
copper group and diamonds group. Gross turnover in 2003 was $11.7
billion with consolidated group net turnover of $9.2 billion.
Corporate Finance Group
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
No Related Data.
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