Fitch Affirms Phelps Dodge Corporation's Senior Unsecured Ratings of 'BBB'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. yesterday affirmed Phelps Dodge Corporation's (PD's) debt ratings and maintained a Stable Outlook based on the company's leading position in the copper industry and sound operational and financial management. Ratings affirmed are the senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings at 'BBB', commercial paper at 'F2', and convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". at 'BBB-'. Fitch also rated PD's $1.1 billion revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility at 'BBB'. Results continue to benefit from the recovery in copper and molybdenum molybdenum (məlĭb`dənəm) [Gr.,=leadlike], metallic chemical element; symbol Mo; at. no. 42; at. wt. 95.94; m.p. about 2,617°C;; b.p. about 4,612°C;; sp. gr. 10.22 at 20°C;; valence +2, +3, +4, +5, or +6. (moly moly herb given by Hermes to Odysseus to ward off Circe’s spells. [Gk. Myth.: Odyssey] See : Protection ) prices, which began in earnest in the fourth quarter of 2003. Strong cash generation coupled with capital discipline in 2004 and the first quarter of 2005 allowed repayment of $1.1 billion in debt to $1.0 billion and accumulation of about $0.7 billion in cash to $1.4 billion. Pro forma for the $276.4 million debt tender recently completed, total debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the four quarters ended March 31, 2005 was 0.34 times (x). While Fitch expects pricing to moderate in the second half of the year, our expectations are for Phelps Dodge to remain strongly free cash flow positive. The bulk of PD's existing operations are low grade with developed reserves averaging under 0.4% copper at Dec. 31, 2004, which translates to relatively high unit costs. The company, however, has a long history of running its operations efficiently and leads in the technology of extracting metals from these ores allowing cash generation throughout the cycle. For example, the concentrate-leach, direct-electrowinning facility planned at Morenci should be completed in 2007 and result in savings on treatment and refining charges (TC/RCs) as well as freight. The ability to replace reserves with higher grade material is constrained, and the company's current expansion projects are modest. The 2004 restart of some curtailed operations is expected to add 164 million pounds of copper (to 2.7 billion pounds) and 3 million pounds of moly (to 33 million pounds) in 2005 compared with 2004 production. The expansion at Henderson is expected to result in 32 million pounds of primary moly production in 2005, up from 27.5 million pounds in 2004 and an annual primary moly production capacity of 40 million pounds by mid-2006. The Cerro Verde expansion is to increase copper production from 200 million pounds per year currently to 600 million pounds in 2007. Phelps Dodge now owns 53.6% of the project. Fitch notes that grades are falling industrywide, and no new large scale projects are anticipated in the near to medium term, which tends to underpin copper prices. Fitch's expectations are for PD to maintain strong liquidity after using some of its high-cycle cash generation to improve its assets, accelerate reclamation, and improve the funding status on its pensions as well as pay dividends. Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from this site, at all times. This document will remain on the public site for seven days. |
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