Investors here copped an absolute canning with REIT's and their associated high debt issues.....writedowns, breach of bank loan covenents, requirement for sale of assets, raisings - every miserable thing that could go wrong has.
OK you can make up your own mind....and I just make the above observation.
But RIO is way, way short of its asset sales target for this year. Note the amount of the repayment due to banks around now.
Just don't rush into buying it at the gap tomorrow.
---------------------------------------------------- 12 August 2008
Rio Tinto completes sale of Kintyre Uranium Project Location: Australia
Rio Tinto has completed the sale of the Kintyre uranium project located in Western Australia to a joint venture comprising subsidiaries of Cameco Corporation and Mitsubishi Development Pty Ltd for US$495 million.
The transaction, which was announced on 10 July 2008, is part of Rio Tinto's planned programme to divest assets worth US$10 billion in 2008.
In November 2007, Rio Tinto announced the results of its overall strategic review of the Group's asset portfolio following its acquisition of Alcan. Options are being explored to divest Rio Tinto Energy America (coal), Rio Tinto Minerals talc and borates businesses, Rio Tinto Alcan Packaging, Rio Tinto Alcan Engineered Products, Rio Tinto's interest in the Northparkes copper mine in Australia and Rio Tinto's Sweetwater uranium assets in the USA.
Earlier this year Rio Tinto sold Greens Creek mine in Alaska for US$750 million and its interest in the Cortez operation in Nevada for US$1.695 billion.
Loan syndication for financing of Alcan acquisition successfully completed Rio Tinto has successfully completed the sub-underwriting phase of the syndication of its US$40 billion term loan and revolving credit facilities (the "Facilities"). This is the largest ever loan facility raised by a UK corporate and the fourth largest worldwide.
The Facilities will be used to finance the acquisition of all the outstanding common shares of Alcan Inc ("Alcan") for a total consideration of US$101 per common share representing a total equity consideration of approximately US$38.1 billion and an enterprise value of approximately US$44.0 billion.
The syndication received very strong support despite recent volatility in the global credit markets and was more than one third oversubscribed. The Facilities were initially underwritten by The Royal Bank of Scotland, Deutsche Bank, Credit Suisse and Société Générale.
Guy Elliott, Rio Tinto's chief financial officer, commented: "This extremely positive response underlines the strength of Rio Tinto's existing asset base, the attractiveness of the Alcan transaction and the solid credit profile of the enlarged Rio Tinto Group. This bodes well for our future refinancing plans in the debt capital markets."
The acquisition of Alcan will create a new global leader in the aluminium industry with large, long life, low cost assets. The acquisition will be value enhancing to Rio Tinto shareholders, and is expected to be earnings and cash flow per share accretive to Rio Tinto in the first full year.
Facility details Structure of the US$40bn Facilities
Facility A US$15bn Term Loan 364-days (1 year extension) Facility B US$10bn Revolving Credit Facility 3 years Facility C US$5bn Revolving Credit Facility 5 years Facility D US$10bn Term Loan 5 years + 1 day
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NOTE DISCLOSURE: I am carrying a short position on the stock - done so because well I had concerns about their debt. Absolutely flogged and learnt alot over about high gearing and writedowns in recent months with propery/financial stocks. Things happened which just defied belief.
Suggestion here....sit on your position if you like. Just not sure it won't go lower. Maybe they will need to take a writedown on the Alcan purchase.
RIO Price at posting:
$50.40 Sentiment: ST Sell Disclosure: Not Held
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