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TEXT-S&P rates Fortescue's proposed $4.5 bil credit facility 'BB+'

(The following statement was released by the rating agency)

Oct 02 - Standard & Poor's Ratings Services today said that it had assigned its 'BB+' long-term rating to the proposed US$4.5 billion senior secured credit facility to be issued by FMG Resources (August 2006) Pty Ltd. , the funding arm of Australian iron ore mining company, Fortescue Metals Group Ltd. (Fortescue, BB-/Negative/--). The rating is subject to the terms and conditions of the final documents. At the same time, we have assigned a recovery rating of '1' on the proposed facility. This indicates our expectations for a very high recovery (90%-100%) in a simulated default scenario. The facility is guaranteed by Fortescue.

The proposed senior secured credit facility will be distributed into the U.S. institutional term loan market and will rank ahead of all other unsecured and unsubordinated debt. The net proceeds of the facility will be used to refinance all existing bank facilities, repayment of the Leucadia loan notes, and for general corporate purposes.

The 'BB-' rating on Fortescue reflects our view of the company's aggressive growth strategy associated with the pace and the funding approach of its expansion projects, limited product diversity, and exposure to volatile commodity prices. These weaknesses are partly offset by Fortescue's relatively long-life reserves, and relatively low-cost and improving iron ore production.

RELATED CRITERIA AND RESEARCH 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 ((Bangalore Ratings Team, Hotline: +91 80 4135 5898, Bhanu.priya@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Bhanu.Priya.reuters.com@reuters.net))