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Standard & Poor’s Ratings Services has placed its ‘BBB+’ long-term corporate credit and bank loan ratings on Switzerland-based Glencore International AG on CreditWatch with negative implications, following the announcement by Swiss mining company Xstrata PLC, which is 40% owned by Glencore, that it has made a formal offer for Australia-based international mining and mineral processing company MIM Holdings Ltd (BBB-/Positive/A-3) for a total consideration of US$2.96bn.

At the same time, Standard & Poor’s affirmed its short-term ‘A-2’ rating on Glencore.

“In order to fund this acquisition, Xstrata will make a rights issue and raise approximately US$1.4bn of fresh equity, to which Glencore has committed to participate,” says Standard & Poor’s credit analyst Olivier Beroud. “Glencore’s share in that issue would amount to about US$570mn and this would add to the group’s debt after a slower 2002 in terms of operating performance and could lead to a one-notch downgrade on the long-term corporate credit rating.”