S&P upgrades Fortescue

Standard & Poor's said it raised the corporate credit rating and senior unsecured debt ratings on Fortescue Metals Group Ltd. to B+ from B with the recovery rating affirmed at 4.

The agency also said it assigned B+ ratings to its proposed $1 billion term loan B and proposed $500 million revolving bank facility by Fortescue's funding arm, FMG Resources (August 2006) Pty Ltd.

The outlook is stable.

The proceeds will be used to fund the company's 155 million tons per annum (mtpa) expansion, S&P said.

The upgrade reflects a view of the company's relatively long-life, low-cost iron ore production, adequate liquidity and improving cash flows due to a buoyant iron ore market and steady state of production, the agency said.

Moderating the rating are the company's asset concentration risk, rising production cost and aggressive growth strategy that calls for a significant capital-expenditure program over the medium term, S&P said.

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