Chilean state copper giant Codelco reported it issued USD 2.0 billion in 10 and 30 year notes.
The issue included USD 1.25 billion in 10 year notes with a coupon of 3.00% and yield of 3.175% as well as USD 750 million in 30 year notes with a coupon of 4.25% and yield of 4.398%.
Mr Thomas Keller CEO of Codelco said that "These results confirm the privileged position of Codelco in the financial markets and indicate clear backing for the seriousness with which the company its investment plans and its financing strategy is being managed."
US based ratings agency Moody's Investors Service assigned A1 foreign currency ratings to two tranches of the senior unsecured notes issue based on its baseline credit assessment for the miner of 5 to 7 on a scale of 1-21, its Aa3 Chilean government bond rating and Codelco's high dependence on and support from the state.
Moody's said that Codelco's competitive cost position, solid reserve base, multiple mine operating profile and vertical integration support the rating adding that although copper prices have trended downward to below 2011 averages and Codelco's earnings will moderate in 2012, earnings and coverage ratios such as Ebit over interest and debt over Ebitda are expected to remain at levels appropriate for the rating.
Moody's also said that despite the large capital requirements of Codelco's project pipeline some USD 15 billion over the coming 4 to 5 years and its requirement to hand profits over to the state, the company's strategic growth investments, competitive costs and output levels will support performance in the mid to long term. The agency also noted Codelco's strategic importance to the Chilean state.
Risks to the rating include any prolonged period of contracted earnings or increased royalties or compliance costs, such as for environmental regulations.
Codelco's debt rating is of extreme importance to the company and often becomes a topic of political debate as the state owned firm does not have discretion over the use of its own profits and must finance a large part of its capital projects with debt.
In June the Chilean government approved Codelco to reinvest in 2012 USD 800 million of its USD 2.06 billion 2011 profits covering just 19% of its USD 4.14 billion capital plan for this year. The state decides on an annual basis how much Codelco will be allowed to reinvest from the previous year's profits.
Source - Business News Americas
(www.steelguru.com)
