S&P rates Fortescue notes BB+

S&P said it assigned a BB+ rating with a recovery rating of 4 to FMG Resources (August 2006) Pty Ltd.'s new senior unsecured notes.

The agency also said it raised the long-term issue credit rating on the company's existing senior unsecured notes due 2022 and 2024 to BB+ from BB.

S&P also said it revised the recovery rating on the existing notes to 4 from 5.

FMG Resources (August 2006) Pty Ltd. is a wholly-owned financing vehicle of Fortescue Metals Group Ltd.

The agency said it believes Fortescue's gradual shift from secured to unsecured debt should improve the recovery prospects of the company's unsecured notes in the event of a hypothetical default.

As such, the ratings on the outstanding unsecured notes and new unsecured issuance are now equal to the BB+ corporate credit rating on Fortescue, S&P explained.

These rating actions follow Fortescue's successful refinancing of its $2.16 billion senior secured notes due in 2022 with a $1.4 billion senior secured term loan due 2022 and $500 million senior unsecured note due 2023.

The BBB- rating on the senior secured notes and BB+ corporate credit rating on the company are unchanged, the agency noted.

The ratings reflect the company's low-cost position on the global iron ore cost curve, as well as its ability to sustain credit metrics in line with the BB+ rating level even under a moderate stress scenario, S&P said.

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