Her Name Is Rio...

Interesting "analysis" by reuters on Rio Tinto, The london-based mining company. BHP Billiton decided not to go ahead with the purchase. Rio built up a huge debt load, and will now have to sell assets in order to roll its debt over. BHP Billiton, perhaps thought that it could buy the pieces it wanted at a cheaper price. Read for yourself:

• As BHP walks, Rio may have to sell more assets

  By Nick Trevethan

  SINGAPORE, Nov 27 (Reuters) - Rio Tinto, the world's No.2

  miner, may have to sell more assets than it bargained for as

  it tackles nearly $40 billion of debt that scared off a takeover

  bid by bigger rival BHP Billiton.

  Rio took on huge debts to fund last year's $38 billion acquisition

  of Alcan, and pledged to raise $15 billion, most of

  it this year, from selling non-core assets.

  But sliding metals prices and slowing demand have made

  those assets worth less, and the global financial crisis has

  made it tougher for potential buyers to get credit.

  To date, Rio has raised just $3 billion from disposals.

  Analysts say Rio might have to go beyond those non-core

  businesses and offer up more prized assets if it wants to

  avoid having to go cap in hand to investors for more equity

  or having to cut planned spending or dividends.

  And BHP could be a bargain buyer.

  "The non-core -- the salt, borates, talc and packaging assets

  -- are up for grabs, but in this market I doubt very

  much that they are worth $15 billion," said a resource equities

  analyst in Melbourne, asking not to be identified.

  "I'm not factoring in any asset disposals. It's impossible to

  say whether they will even get book value."

  Rio spokesman Nick Cobban said: "We have raised $3 billion,

  but we recognise the change in global economic circumstances

  and we won't reach the $10 billion target this

  year. We have not put a date on (hitting) that target.

  "The sale processes continue, but we won't make any announcements

  until they are completed."

  BHP's shock decision to walk away from its $66 billion offer

  for Rio knocked more than a fifth off Rio's market value in

  Australian trading on Wednesday, and prompted rating

  agency Moody's to signal a possible Rio credit downgrade.

  On Thursday Rio pared its losses slightly, rising 2 percent in

  Sydney. BHP shares, which rose nearly 4 percent on

  Wednesday, added another 5.7 percent.

  RISING INTEREST

  Rio Tinto is currently paying a little more than 2 percent

  interest on its debt pile, but analysts said that could rise

  sharply in the next round of refinancing in the 2009 fourth

  quarter as lenders re-price risk amid a global credit crisis.

  "They will have to divest far more quickly than they may

  have liked and BHP might be there to snap up some of

  those assets," said Andrew Harrington, coal analyst at Patterson

  Securities in Sydney.

  He said BHP has around A$8.5 billion ($5.47 billion) in cash

  and current assets, and end-June debts of around A$12

  billion.

  Harrington noted Rio owns 75 percent of Australia-listed

  Coal and Allied, and a sale of that stake could net around

  A$8-10 billion, including a takeover premium.

  "The question remains: who would want to spring for their

  thermal coal assets? Credit markets are tight so you'd need

  pretty deep pockets, which makes me think BHP may now

  be thinking about buying choice pieces of Rio without having

  to acquire all the stuff they don't want."

  Other bidders for Rio assets may include private equity

  firms Apollo Global Management and Bain Capital, as well

  as Australian packaging group Amcor Ltd and U.S. packager

  Bemis Co attracted by the flexible food packaging

  business, one of the largest in the world, though its size

  could make it hard to raise funding in the current climate.

  BHP Billiton chief Marius Kloppers did not rule out making

  a pitch for Rio assets at its Australian annual general meeting.

  In response a question whether BHP would be interested in

  any Rio Tinto assets if they came up for sale, Kloppers said:

  "If opportunities come up...we would be very interested in

  looking at any assets that are tier 1, low cost, long life, environmentally

  sound and so on," Kloppers told reporters after

  the meeting.

  The Rio spokesman said the company was focused on selling

  the assets it had already flagged and had no immediate

  comment on whether it was considering other sales.

  "Rio may need to look at new asset sales initiatives. They'll

  need to balance those sales against equity or debt funding

  next year," said FW Holst analyst Rob Craigie, noting, however,

  that the next 6-12 months would not be an easy time

  to sell.

  Rio may avoid having to sell off more of the family silver -- if

  commodity markets pick up after prices slumped by half in

  the last five months. Rio is looking for a recovery in the second

  quarter in China, and increased demand for its raw materials.

  The Rio spokesman said the company was in a strong position

  financially.

  "We don't see any reason to raise more equity. We have

  strong cashflow and we are disposing of some good businesses.

  We have no payments due until next October."

  He said Rio generated cashflow of $1.5 billion a month in

  the first half of this year and noted many of its sales contracts

  were locked in until April. Rio has around $9 billion

  of debt due to be repaid next October.

  "From the Rio point of view, you're still dealing with a company

  with A-grade assets," said Tim Schroeders, portfolio

  manager at Pengana Capital.

  "Yes, there's a focus on their debt position, but their interest

  cover is very adequate."