Fitch puts BHP Billiton on negative watch over Potash bid

19th August 2010, Comments 0 comments

Ratings agency Fitch placed miner BHP Billiton on negative watch on Thursday, citing its 40-billion-dollar hostile takeover bid for Canada's Potash Corp, the world's largest fertiliser producer.

"Fitch Ratings has placed UK-based BHP Billiton Plc's and Australian-based BHP Billiton Ltd's 'A+' long-term issuer default rating and senior unsecured rating on rating watch negative," the agency said in a statement.

"The group's 'F1' short-term issuer default rating has also been placed on rating watch negative."

The news comes one day after BHP launched a hostile takeover offer for Potash which valued the group at the equivalent of 31 billion euros. The offer had already been rejected by Potash as "grossly inadequate".

Fitch added on Thursday: "Today's action follows BHP's announcement of an unsolicited all-cash offer to acquire Canadian potash producer Potash Corp of Saskatchewan Inc for 130 dollars per share.

"The ratings watch negative reflects Fitch's expectation that the acquisition would result in higher leverage, although the long-term strategic benefits of the transaction are likely to limit any downgrade to two notches.

"On the assumption that the transaction were to be completed on a fully debt-funded basis, and in the absence of material asset disposals, the impact upon BHP's credit metrics could be significant."

Potash is a fertiliser that is widely used in farming to replenish nutrients in soils and increase crop yields.

© 2010 AFP

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