Rio, Alcan 'not worried' about deal financing

Rio Tinto and Alcan Inc are not concerned about the potential for rising borrowing costs for Rio's debt-funded $US38.1 billion ($NZ55.34 billion) takeover, officials at the two companies said on Friday. "We don't have any worries at all," said Rio Tinto spokesman Nick Cobban. He noted that the debt used to finance the deal is committed bank financing, underwritten by Royal Bank of Scotland Deutsche Bank , Credit Suisse and Societe Generale, which have been selling the debt in the market. "My understanding is it's all going very well," he said. He wouldn't comment on Rio's financing costs specifically or the potential for them to rise. Alcan, for whom the friendly Rio offer trumped a hostile bid from US rival Alcoa, also said it was not worried. "From where we are, we have no concerns about Rio Tinto's ability to finance the transaction," said Alcan's investor relations vice-president, Ulf Quellmann. Sources said on Friday that Alcan is close to a deal to sell its packaging arm to bubble wrap maker Sealed Air Corp for between $US4 billion and $US5 billion. Alcan announced plans to sell off the unit when the Rio takeover was unveiled. Concerns about rapidly tightening credit – sparked by the US subprime mortgage meltdown – have prompted concerns that debt costs could rise sharply. Charles Bradford, an analyst at Bradford Research/Soleil, said he was not concerned that higher borrowing costs could stand in the way of the Alcan deal going through. "This is very high-quality credit. The company (Rio) had almost no debt," he said. Alcan shares were up $US1.77 at $US94.07 on the New York Stock Exchange on Friday, below Rio Tinto's $101 per share offer. The stock has traded in a $US95 to $US97 range in New York since the deal was announced. The shares were up 90 Canadian cents at $C99.93 on the Toronto Stock Exchange. Rio's London-listed shares, which have fallen sharply since mid-July, rose 1.8 per cent to 2,940 pence. Shares of most resource companies have fallen hard over the past month on worries of tightening credit and the potential slower economic growth, which could reduce demand for raw materials.