Fitch Ratings has upgraded the Issuer Default Rating (IDR) and debt ratings of Freeport-McMoRan Copper & Gold Inc. (FCX) and its subsidiary, Phelps Dodge, as follows:
FCX
--IDR to 'BB+' from 'BB';
--$1 billion secured bank revolver to 'BBB-' from 'BB+';
--Secured term loan A to 'BBB-' from 'BB+';
--6.875% secured notes due 2014 to 'BBB-' from 'BB+';
--Unsecured notes due 2015 and 2017 to 'BB+' from 'BB';
--7% convertible notes due 2011 to 'BB+' from 'BB';
--Convertible preferred stock to 'BB-' from 'B+'.
Phelps Dodge
--8.75% senior unsecured notes due 2011 to 'BB+' from 'BB';
--7.125% senior unsecured debentures due 2027 to 'BB+' from 'BB';
--9.50% senior unsecured notes due 2031 to 'BB+' from 'BB';
--6.125% senior unsecured notes due 2034 to 'BB+' from 'BB'.
In addition, Fitch has affirmed the following rating on FCX:
--$500 million PT Freeport Indonesia/FCX Secured Bank Revolver at 'BBB-'.
The Rating Outlook remains Positive.
Fitch expects total debt to be $7.3 billion at year-end given repayment of bank debt through internally generated cash and the proceeds from the sale of its international wire and cable business. Strong metals prices should continue to drive earnings over the next 12-to-18 months resulting in leverage as measured by Total Debt/EBITDA of less than 1 times (x). Fitch expects free cash flow to be more than sufficient to cover dividends and capital spending over the time period.
An unexpected downturn in metals prices, a substantial shortfall in production or significant additional debt financing could trigger a downgrade of the ratings and/or Rating Outlook.
The ratings reflect FCX's position as the world's second largest copper producer, its diversified operations and strong liquidity as well as the company's exposure to copper prices and its financial leverage. The outlook is for copper producers to continue to benefit from a strong pricing environment over the near term.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
