DBRS Confirms Noranda Operating Trust at BBB, Stable, Removes from UR-Negative

DBRS has today confirmed the rating of the Senior Secured Notes of Noranda Operating Trust (the Trust) at BBB with a Stable trend following the announcement by Noranda Income Fund (the Fund) that the Trust has extended its short-term credit facilities to November 3, 2010. The Senior Secured Notes have been removed from Under Review with Negative Implications (where they were placed on February 18, 2009) due to DBRS’s expectation that the Trust will be able to successfully refinance both its Senior Secured Notes and its short-term credit facilities in a timely fashion.

The rating of the Trust’s Senior Secured Notes was downgraded on July 20, 2009, and maintained Under Review with Negative Implications. This rating action was taken as a result of the potential strain on the Trust’s borrowing capacity and covenant requirements under its short-term borrowing facility due to reduced production and cash flow from its CEZinc processing facility at Salaberry-de-Valleyfield, Québec (the CEZinc facility). Production at CEZinc has been restored to normal levels and potential covenant breaches under the short-term borrowing facility have been avoided.

The borrowing facility maturity extension provides the Trust with adequate time to arrange for the refinancing of its $154 million long-term debt due in December 2010 and for the provision of new short-term borrowing capacity. Given the importance of the CEZinc facility to Xstrata Canada Corporation’s Canadian zinc mining and marketing operations and the profitability of the CEZinc facility under normal operating conditions, DBRS believes that the Trust will be successful in refinancing its Senior Secured Notes and in obtaining new short-term borrowing, hence the confirmation of the BBB rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.