(The following was released by the rating agency)
SYDNEY (Standard & Poor's) Oct. 8, 2012--Standard & Poor's Ratings Services said today that its rating on QR National Ltd. (QRN; BBB+/Stable) is not immediately affected by the company's agreement with Queensland Treasury Holdings Pty Ltd. (QTC) to buy back A$1 billion of QRN shares currently held by QTC. This agreement is subject to QRN shareholders' approval and, if successful, the transaction is expected to be concluded by the end of November.
We expect the buyback to be primarily debt-funded, which would reduce the buffer in the company's financial metrics. We now expect the funds from operations (FFO)-to-debt ratio for fiscal 2013 to be at the lower end of the 35%-to-40% range we expect for the 'BBB+' rating, compared to an FFO-to-debt ratio of more than 65% in fiscal 2012. Therefore, we view that the rating on QRN would be potentially more sensitive to an adverse business environment and the company's future capital management and investment initiatives.
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