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S&P may cut Anglo American Plc l-t 'A-' ratings

Thursday February 26, 11:19 am ET


(The following statement was released by the ratings agency)
NEW YORK, Feb 26 - Standard & Poor's Ratings Services said today it placed its 'A-' long-term corporate credit and senior unsecured debt ratings on U.K.-based mining group Anglo American PLC on CreditWatch with negative implications, following the group's announcement that it is seeking to acquire a controlling interest in Portucel - Empresa Produttora de Pasta e Papel, SA, one of the largest uncoated fine paper producers in Europe.

At the same time, Standard & Poor's affirmed its 'A-2' short-term rating on Anglo.

"The acquisition price for Portucel is not known at this stage nor is the method of financing that Anglo proposes to use, with regards to the proportion of debt and equity," said Standard & Poor's credit analyst Olivier Beroud."Standard & Poor's is concerned, however, that--should Anglo's bid be successful and funded with a significant portion of debt--this transaction could have a detrimental effect on the group's already stretched financial profile and could lead to a one-notch downgrade."

The ratings on Anglo had a negative outlook prior to the Portucem bid announcement, as the group continues to be faced with the risk that the South African rand will continue to strengthen or retain its current level against the U.S. dollar in 2004, which is negatively affecting its cost base, and that its financial profile could become excessively stretched at the current rating level. The group, however, could reduce its debt level through capital expenditure curtailment or asset disposals and restore it financial profile to a level adequate for the rating category.

Standard & Poor's will monitor the situation and meet with Anglo's management to determine the exact modality of the proposed transaction with a view to resolving the CreditWatch in the coming weeks.