S&P rates Fortescue notes BB+

S&P said it assigned its BB+ issue rating and 4 recovery rating to FMG Resources (August 2006) Pty Ltd.'s new 10-year senior unsecured $1.5 billion notes.

The 4 recovery rating reflects expectations of average recovery prospects (30%-50%; rounded estimate: 40%) under a hypothetical default. “Our simulated default occurs in 2026. In our view, Fortescue's creditors would realize greater value through reorganizing the company as a going concern than liquidating its assets,” S&P said in a press release.

FMG Resources is a wholly owned financing vehicle of Fortescue Metals Group Ltd. The company’s BB+ long-term issuer credit rating remains unchanged.

Fortescue will use the proceeds to redeem its $750 million of 2022 notes and fund general corporate purposes, which may include debt repayment.

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