DBRS Comments on Potential Offer to Purchase Noranda Income Fund

DBRS notes today that Noranda Income Fund (the Fund) has announced that the Fund has entered into a non-binding letter of intent with Xstrata Canada Corporation (Xstrata Canada) with respect to a potential acquisition of all of the outstanding priority units of the Fund for cash consideration of $3.40 per priority unit. DBRS provides a Stability Rating for the Fund’s priority units (currently STA-5 (low), Under Review with Negative Implications) and rates the Senior Secured Notes (Notes) of the Fund’s wholly owned subsidiary Noranda Operating Trust (currently BBB, with a Stable Trend).

The letter of intent signed is non-binding and provides Xstrata Canada with a 30-day minimum “exclusivity period” and certain other non-materials matters. It is expected that any potential offer by Xstrata Canada would be subject to a number of customary conditions, including the completion of satisfactory due diligence, standard material adverse effect conditions and regulatory approvals, as well as specific conditions such as the Fund not entering into any transaction or financing with respect to its currently outstanding debt.

The Fund has cautioned that no definitive agreement has been entered into with Xstrata Canada except for a 30-day minimum exclusivity period and certain other non-materials matters. Accordingly, there is no assurance that the process contemplated by the letter of intent will lead to a definitive agreement relating to the acquisition of the Fund’s priority units on the terms contemplated by the letter of intent or otherwise or by any other transaction.

DBRS downgraded the Fund’s Stability Rating to STA-5 (low) and maintained its Under Review with Negative Implications status on April 20, 2010, pending the resumption of distributions of the Fund following their suspension during the period that Noranda Operating Trust was in the process of renegotiating its short-term credit facilities.

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.