Bks Launch General Syndication Of $40B Rio Tinto Loan

LONDON (Dow Jones)-The four banks that underwrote Rio Tinto PLC’s (RTP) $40 billion loan to fund its takeover of Canada’s Alcan Inc. (AL) launched the debt to general syndication late Thursday ahead of a bank meeting next week, two people familiar with the situation told Dow Jones Newswires Friday.

The mining group completed the first phase of syndication in August. Underwriters Royal Bank of Scotland, Deutsche Bank, Credit Suisse and Societe Generale sold the loan to 23 other lenders in that first round of syndication, one of the people said.

Between 40 and 50 banks have been invited to join the facility in general syndication, with potential lenders being offered tickets of $350 million and $200 million to join as arrangers and co-arrangers respectively, the two people said.

The debt consists of a $15 billion 364-day term loan, a three-year $10 billion revolving credit facility, a five-year $5 billion revolving facility, and a five-year $10 billion loan.

A bank meeting is scheduled for Nov. 28 in London, two days after an investor seminar where Rio Tinto is expected to emphasize the long-term value of the company as a stand-alone business as it seeks to fend off a proposed takeover from rival BHP Billiton PLC (BHP).

Rio Tinto rejected a proposed three-shares-for-one bid from BHP Billiton Nov. 8 which values the mining group at some $119 billion, saying it undervalued the company.

The people familiar with the debt financing conceded that it was not an ideal time to launch general syndication of the loan given BHP Billiton’s approach and the crisis in global credit markets.

"The markets aren’t great. Ideally, the banks would have liked to have launched general syndication about two weeks ago," one of the people familiar with the situation said. "But the banks and the company had to look at the situation with regards to BHP Billiton before moving ahead with syndication."

Responses and commitments to the loan are due Dec. 12, the person said.

However, the two people familiar with the situation said some lenders may prefer to sign into the facility in the new year because of year-end balance sheet constraints.

Nobody was immediately available at Rio Tinto for comment.

The company said in August that it planned to refinance some of the debt through a bond issue.

Nevertheless, a bond issue is unlikelyin the short term after the U.S. subprime mortgage market crisis indirectly pushed up the cost of corporate issuance and hit investor demand.