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S&P: Inco remains on developing watch
Standard & Poor's said it kept its ratings on Inco Ltd. on CreditWatch with developing implications after the company announced revised terms to its friendly takeover of Falconbridge Ltd. (BBB-/Watch developing/A-3).
S&P noted that the value of the transaction has increased markedly since it was proposed in October 2005 because of a significant appreciation of both Inco's and Falconbridge's share price.
The key rating factor, however, is the debt-financed cash component, which Inco has increased to $4.3 billion from $2.4 billion, the agency said, adding that should the transaction be completed as proposed, the ratings would be maintained at BBB- with a negative outlook.
S&P said it estimates that the combined entity's fully adjusted debt, including $2.3 billion of asset-retirement obligations and employee post-employment benefits, would near $12 billion, which results in leverage that would be high for the rating at 2.8 times pro forma last 12 months EBITDA, especially considering the remarkable strength of metals prices.
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