S&P lowers Rio Tinto

Standard & Poor's said it lowered to BBB/A-3 from BBB+/A-2 the long- and short-term corporate credit ratings on Rio Tinto plc and Rio Tinto Ltd.

This is due to a sharp market downturn coupled with substantial adjusted debt of about $47 billion, which will likely prevent an improvement in leverage and creates heightened refinancing risks, the agency said.

Ratings were removed from CreditWatch, where they were placed with negative implications on Nov. 27, following the end of a takeover offer from BHP Billiton (A+/stable/A-1).

The outlook is negative.

"The downgrade reflects our expectation that profits, cash flows and leverage will be too weak for the previous BBB+ rating, due to a sharp downturn in global economic conditions and the commodity cycle. This is coupled with a legacy of high debt and sizeable debt maturities in both 2009 and 2010, which have also strained liquidity," S&P analyst Alex Herbert said in a statement.

Ratings reflect Rio Tinto's profile as one of the world's largest diversified metals and mining groups, the agency said.

Substantial portfolio of low-cost, high-quality reserves, healthy profit margins and positive free operating cash flow generation support ratings, the agency said.

Constraining factors include a rapidly weakening global economic outlook, sharply declining commodity prices and high debt with attendant refinancing risks, the agency noted.

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