Bloomberg reported that Standard & Poor's said that BHP Billiton Ltd, planning to take on the biggest ever corporate loan by buying Rio Tinto Group, is now better able to handle repayments because of surging cash flows.

Mr Craig Parker, a director at S&P in Melbourne, said that the cash generated from BHP's oil, iron ore and coal business will help sustain a proposed bid for Rio Tinto as a global credit crunch increases borrowing costs.

Mr Parker said that “BHP itself is generating significant free cash so its reliance upon that bank facility is probably less of a concern then what it was when they first initiated the Rio offer. The cost of raising that debt still makes economic sense for the merger to proceed despite the fact that the credit crunch has occurred.''

He added that “BHP has got the benefit of the petroleum division and those prices are helping them to generate substantial free cash. Iron ore and coal prices are going gangbusters.”

BHP in February agreed to borrow a record USD 55 billion from Goldman Sachs Group Inc., Citigroup Inc. and five more banks for its Rio Tinto bid. BHP also plans to buyback as much USD 30 billion in stock should the takeover be successful.