Moody's rates Fortescue notes Ba1

Moody's Investors Service said it affirmed Fortescue Metals Group Ltd.'s Ba1 corporate family rating and the Baa3 senior secured rating of FMG Resources (August 2006) Pty Ltd.

The agency also said it upgraded the existing senior unsecured ratings of FMG Resources (August 2006) to Ba1 from Ba2 and assigned a Ba1 rating to the company's new $500 million of 5 1/8% senior unsecured notes due 2023.

The outlook is stable.

The upgrade of the senior unsecured rating reflects an expectation that the company will use the proceeds of the new senior unsecured notes, a new $1.4 billion term loan and cash to retire all of the current senior secured notes outstanding, Moody's said.

All of these transactions are likely to occur over the next several months, the agency said.

The refinancing plans for the senior secured notes, once completed, will result in a reduction in the amount of secured debt ranking ahead of the senior unsecured notes, as well as the transition away from debt, which benefits from an all assets pledge, Moody's said.

As a result, the agency said it expect that the potential loss given default for the senior unsecured notes has declined.

This issuances, combined with expectations for cash flow, will allow the company to redeem all of the senior secured notes in the near term, Moody's said.

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