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[Jan Klimkowski]

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Moody's Cuts Rio Tinto's Rating Outlook on Lower Metal Prices

By Rebecca Keenan

Nov. 7 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, had its rating outlook cut by Moody's Investor Services because of global market turmoil, falling metal prices and slow progress in asset sales.

``Rio Tinto's 2009 performance will be adversely impacted by the negative market conditions in, and the outlook for, key metal markets,'' the New York-based agency said in a statement. It reduced its rating to ``developing'' from ``positive.''

Commodity prices have declined 44 percent since the end of June as the financial crisis deters lending. Rio, which has $8.9 billion of its $42 billion in debt maturing in October, has said the credit crisis may delay $10 billion in asset sales.

Rio, traded in London and Sydney, slumped 9.8 percent to A$71.30 at 11:26 p.m. Sydney time on the Australian stock exchange, giving it a market value of about A$91 billion ($60 billion). It has declined 47 percent this year compared with a 37 percent fall in the benchmark index.

The slower-than-anticipated progress in asset sales and the chance that proceeds could be lower, contributed to the change to Moody's outlook, it said. Still, Rio will be able to meet its debt requirements unless metal prices decline ``materially farther'' from current levels, Moody's said.

Sales Program

``The company's ability to execute on its divestiture program and reduce debt over the next 12 months will be a key factor in its rating,'' Moody's said. ``The lower cash generation, in combination with continued high debt levels, is pressuring the company's ratings.''

Concern that London-based Rio may not being able to repay debt were not ``valid'', Chief Financial Officer Guy Elliot said Oct. 15. There was ``no doubt'' the company could service its current debt, he said. Rio Tinto spokeswoman Amanda Buckley declined to comment when contacted at her Melbourne office today.

Rio's debt to capital ratio at June 30 was 55 percent, according to Moody's standard measurements, compared with 16 percent at the end of 2006, the ratings company said.

Rio Tinto has also joined United Co. Rusal and Cia. Vale do Rio Doce in reining in spending and cutting output to match the drop in demand for metals.

http://www.bloomberg.com/apps/news?pid=2...4eSr.q0Io8