Rio Tinto says on track on major asset sales

By James Regan and Sonali Paul

SYDNEY/MELBOURNE (Reuters) - Global miner Rio Tinto Ltd (RIO.AX) (RIO.L) said on Wednesday it was confident it could sell assets worth billions of dollars to pay down massive debt, despite concerns about a lack of buyers, a day after rival BHP Billiton Ltd dropped a bid for the firm.

BHP's (BHP.AX) (BLT.L) shock decision on Tuesday to pull its $66 billion bid sent Rio's shares plunging by almost 40 percent, amid concerns Rio would struggle to sell assets and cut its $39 billion in net debt during a severe global economic downturn.

Analysts questioned Rio Tinto's confidence it could sell assets in the next few months.

"That's by no means certain," said FW Holst analyst Rob Craigie. "There may be additional assets they would consider selling. But the environment over the next six to 12 months is not going to be a good environment for selling assets."

BHP Billiton cited Rio's debt position in scrapping its hostile bid approach, as well as sliding metals prices, the threat of global recession and demands from European competition regulators to sell off some iron ore and coal assets.

But Rio's chairman, Paul Skinner, speaking at a scheduled business breakfast on Wednesday, said the group was comfortable with its financial position, remained committed to increasing its dividend, and dismissed market speculation Rio would need to raise equity.

He said it would make asset sales in the next few months.

"We now move on. We have a very strong company," Skinner told reporters. "We are confident with our financial position. We have other ways of managing our debt."

Credit rating agency Fitch downgraded Rio by one notch to BBB+ with a negative outlook and removed the company from 'rating watch positive' on Wednesday, citing concerns about its elevated debt levels in a climate of sharply falling commodity prices.

Rival rating agency Moody's signaled a possible downgrade to Rio's high-investment-grade A3 rating, noting that asset sales would be a key focus of its rating review.

Assets on the block include a major packaging business, aluminum products, its U.S. coal business, an Australian copper mine and its U.S. Sweetwater uranium mine.

Rio Tinto spokeswoman Amanda Buckley said the company was focusing on selling the assets flagged, but had no immediate comment on whether it was considering other asset sales.

BHP's Rio bid was hatched last November, as mining boomed on soaring demand for iron ore, steel and other resources from China and other emerging markets. At its peak, the all-share offer valued Rio at about $193 billion, promising to be the second-largest takeover in history.

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Rio Tinto shares dropped 34 percent in the first day of trading in Australia after BHP abandoned the bid, nearly matching a slide in its London-listed shares the previous day. Rio's share price was down a further 3.5 percent on Wednesday, trading at 1495 pence in London at 9:49 a.m. EST, when BHP was up 4 percent at 1095 pence.