Moody's may upgrade Vale do Rio Doce foreign-currency ratings

Moody's Investors Service said it placed the Baa3 foreign-currency ratings of Companhia Vale do Rio Doce and its wholly owned subsidiary Vale Overseas Ltd. under review for possible upgrade. The ratings had been under review with direction uncertain.

Vale do Rio Doce's Baa1 global local-currency issuer rating and Aaa.br national scale rating remain under review for possible downgrade due to the anticipated increase in debt associated with the company's all-cash bid to acquire Inco Ltd.

The review for possible upgrade for the foreign-currency ratings reflects the scenario in which Vale do Rio Doce's acquisition of Inco does not close and the local-currency rating is confirmed at Baa1. In this instance, Vale do Rio Doce's foreign-currency rating, under Moody's piercing methodology, would be upgraded to Baa2, reflective of the agency's recent upgrade of the Brazilian government's foreign bond ratings to Ba2.

However, should the acquisition close, it is likely that the foreign-currency ratings would be confirmed at the Baa3 rating level. The agency said this outcome considers the likelihood that the Baa1 global local-currency issuer rating will not be downgraded to below investment grade.

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