Rio Tinto May Sell Treasury Shares to Pay Debts, Evolution Says

Jan. 20 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, may raise funds by selling its own holdings of the company’s shares to help pay down $8.9 billion of debt due in October, according to Evolution Securities. “Rio Tinto will find it difficult refinancing its borrowings,” analyst Charles Kernot wrote in a report today. “It will have to resort to an equity issue. To make life easy, and not require shareholder approval, we assume that the company issues the 245 million shares it holds in treasury.” The sale would raise about $4.2 billion, reducing the amount of operations Rio would need to sell to pay its debts, Kernot wrote. Evolution also curbed its forecast for Rio’s net income in 2009 by 15 percent to $3.4 billion on falling copper prices, cut its stock recommendation to “sell” from “reduce,” and lowered its price estimate by 21 percent to 1,180 pence ($16.40). Rio Tinto has slumped 39 percent to 1,502 pence in London since Nov. 25 when BHP abandoned a hostile bid, citing Rio’s debt, regulatory hurdles and falling commodity prices. Rio said in December it would sell $10 billion of assets, slash spending by $5 billion and cut 14,000 jobs to pay $38.9 billion of debt.