Rio May Cut Chinalco’s Share of Planned Bond Sale, FT Says

May 4 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, may seek to reduce the convertible notes it’s selling to Aluminum Corp. of China and offer about $3 billion worth to other shareholders, the Financial Times said. Chinalco, as the state-owned company is known, may be asked to buy convertible bonds worth 5 percent of Rio’s enlarged offer, rather than about 8 percent now, the paper said citing a “compromise scenario” that may help overcome shareholder opposition. A company has the right to sell stock worth 5 percent of enlarged capital without seeking shareholder approval under U.K. law, the paper said. Rio Tinto spokeswoman Amanda Buckley wasn’t immediately available when contacted at her Melbourne office this morning. The probability of Chinalco completing the $19.5 billion investment in Rio, which includes the bond sale as well buying stakes in Rio’s mines, is below 50 percent, Liberum Capital Ltd. said last month, citing a rebound in financial and commodity markets. London-based Rio will consider selling shares, bonds, assets, reschedule its debt or a combination of the four should the deal fail, Chief Financial Officer Guy Elliott has said. Rio shares rose 2.5 percent to A$65.80 at 10:07 a.m. Sydney time on the Australian stock exchange. They have gained 47 percent since Feb. 12, when the Chinalco deal was announced. Chinalco, already Rio’s largest shareholder, has agreed to buy $7.2 billion of convertible debt and stakes in Rio’s projects worth $12.3 billion. If the investment is approved by Australia and Rio shareholders Chinalco will own 18 percent of the dual-listed company if it converts the debt. Rio Chief Executive Tom Albanese was forced to seek a deal to help reduce as much as $38.9 billion of debt largely incurred from buying Canadian aluminum producer Alcan Inc. Rio’s debt was one of the reasons why BHP Billiton Ltd. abandoned its $66 billion hostile bid for Rio in November.