MELBOURNE: Rio Tinto Group, the world's third-largest mining company, completed this year's second biggest share sale, reducing the high level of debt that forced it to consider selling stakes in its most valuable assets.
London-based Rio yesterday finished a US$15.2 billion ($24 billion) share sale to existing holders, selling 95
per cent of the Australian-traded shares on offer, Rio said. On Thursday, 97 per cent of its London-traded shares were sold in the offer.
Rio scrapped a US$19.5 billion investment proposal from its biggest shareholder Aluminum Corp of China last month in favour of raising US$21 billion from a share sale and an iron ore joint venture with BHP Billiton.
The deals allowed Rio to reduce US$38.9 billion of debt without selling bonds and stakes in its largest mines, defusing a backlash from politicians and shareholders.
"Rio has ended up with the best deal they could have done," said Don Williams, who helps manage A$1.1 billion ($1.38 billion) as chief investment officer at Platypus Asset Management, including BHP and Rio stock. Rio will cut its debt to US$23.2 billion once it receives the US$5.8 billion payment from BHP to create the 50-50 venture.
BHP abandoned its US$66 billion hostile takeover bid for Rio in November, partly because of Rio's high-level of debt.
Rio is cutting jobs and trying to sell assets to help repay US$10 billion of debt, mostly incurred through the 2007 purchase of Alcan.
- BLOOMBERG
