DBRS Places Xstrata Ratings Under Review with Developing Implications Following Agreement for All-Share Merger with Glencore

DBRS has today placed the ratings of Xstrata plc and its related entities (Xstrata or the Company, rated A (low), R-1 (low) and Pfd-2 (low)) Under Review with Developing Implications following the Company’s announcement that the directors of Glencore International plc (Glencore) and independent directors of Xstrata have reached an agreement on the terms of an all-share merger of Xstrata and Glencore to be effected by means of a court-sanctioned scheme of arrangement under the laws of the United Kingdom, pursuant to which Glencore will acquire the entire issued and to be issued ordinary share capital of Xstrata not already owned by the Glencore Group. The merger arrangement remains subject to approval of Xstrata and Glencore shareholders. In addition, DBRS expects that the merger arrangement will be subject to approvals or clearances from regulatory and other agencies and bodies.

DBRS believes that if a merger between Xstrata and Glencore is completed as contemplated, the financial structure of the ensuing entity could differ from Xstrata’s existing financial structure, potentially leading to a change in the risk profile of Xstrata and its related companies’ debt securities and, consequently, the need to re-examine the ratings of those securities and companies. This will require a close examination of the merger documents and their implications. Accordingly, DBRS has placed Xstrata’s ratings Under Review with Developing Implications until that analysis can be completed and until the potential outcome of the merger becomes more certain.

Glencore is a leading integrated producer and marketer of commodities and currently owns approximately 34% of Xstrata. Glencore’s reported estimated adjusted EBITDA for 2011 was $6.5 billion and its total assets, $86.1 billion, including its investment in Xstrata. Xstrata’s reported preliminary operating EBITDA after exceptional items for 2011 was $11.6 billion and it held total assets of $74.8 billion.

On November 21, 2011, DBRS confirmed the ratings of Xstrata plc and its related entities at A (low), R-1 (low) and Pfd-2 (low), all with Stable trends. The confirmation reflected Xstrata’s solid balance sheet and credit metrics and ongoing improvements in the cost-competitiveness of its large-scale, diversified operations.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The Commercial Paper of Xstrata Finance (Canada) Limited is bank-line supported.

The ratings of Xstrata Finance (Canada) Limited are bank-line supported and guaranteed by Xstrata plc. The ratings of Xstrata Canada Corporation are guaranteed by Xstrata plc.

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