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Fitch rates Freeport-McMoRan bank loan BBB-
Fitch Ratings said it assigned new ratings to Freeport-McMoRan Copper & Gold and downgraded the ratings of Phelps Dodge in connection with Freeport-McMoRan's pending acquisition of Phelps Dodge for about $25.9 billion in cash and stock. The transaction is subject to shareholder approval. The transaction is expected to give rise to about $16 billion in additional debt.
Ratings assigned include Freeport-McMoRan's issuer default rating at BB, $500 million PT Freeport Indonesia/Freeport-McMoRan secured bank revolver at BBB- and $1 billion secured bank revolver at BB. Its $2.5 billion secured bank term loan A was rated BB, $7.5 billion secured bank term loan B was rated BB, existing notes to be secured were rated BB, 10.125% senior notes due 2010, 6.875% notes due 2014 and 7% convertible notes due 2011 were rated BB-, Freeport-McMoRan's new unsecured notes due 2015 and 2017 were rated BB- and its convertible preferred stock was rated B+.
Downgraded ratings include Phelps Dodge Cyprus Amax 7.375% notes due May 2007, to be secured and to be guaranteed by Freeport-McMoRan, to BB- from BBB, 8 ¾% notes due 2011, 7.125% debentures due 2027, 9 ½% notes due 2031 and 6.125% notes due 2034 to be guaranteed by Freeport-McMoRan to BB- from BBB. Phelps Dodge ratings have been removed from Ratings Watch negative.
The outlook is stable.
Results of both companies continue to benefit from strong metals prices albeit at lower levels than the very high prices in 2006, the agency said. Metals prices, over the short to medium term, should allow significant debt reduction and permit leverage to remain in a range consistent with the ratings in a modestly lower earnings environment, Fitch added.
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