Fitch lifts Freeport-McMoRan view to positive

Fitch Ratings said it changed the outlook for Freeport-McMoRan Copper & Gold Inc. and Phelps Dodge Corp. to positive from stable following the completion of $5.76 billion in equity financings.

Freeport-McMoRan has a BB issuer default rating, BB secured bank revolving credit facility, term loan A and term loan B, BB senior notes, BB- convertible notes and unsecured notes and B+ convertible preferred stock. Subsidiary PT Freeport Indonesia's secured revolver is rated BBB-, and Phelps Dodge's senior unsecured notes and debentures are rated BB-.

Net proceeds in the amount of $5.6 billion will be used to repay borrowings under the secured term loans used to finance, in part, the acquisition of Phelps Dodge. Loan prepayments are applied to reduce subsequent scheduled repayments in direct order, which will result in no scheduled repayment over the medium term, Fitch said. Annual dividends will increase by about $252 million and annual interest costs will be reduced by about $385 million.

The agency said the ratings balance Freeport-McMoRan's position as the world's second-largest copper producer, diversified operations and strong liquidity against its exposure to copper prices and relatively high financial leverage. Fitch's outlook for copper producers is that they will continue to benefit from a strong pricing environment over the near term.

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