UPDATE 1-Rio launches rights issue, warns on commodities

* Rio Tinto releases prospectus for $15.2 bln rights issue * Issue is world's fifth largest ever * Warns commodities markets still hurting bottom line (Adds details, background) MELBOURNE, June 16 (Reuters) - Global miner Rio Tinto (RIO.AX)(RIO.L) said on Tuesday it expects weak commodity markets to continue to hit its bottom line as it launched the world's fifth largest rights issue to cut billions of dollars of debt. "The recent significant reduction in commodity prices and global demand for the group's products has had, and is expected to continue to have, a material adverse impact on the group's business, financial condition and results of operations," Rio Tinto said in the prospectus for its $15.2 billion rights offer. Rio announced the share sale two weeks ago after abandoning a planned tie-up with China's state-owned Chinalco, instead agreeing to set up a $116 billion iron ore joint venture with bigger rival BHP Billiton (BHP.AX)(BLT.L). The 21-for-40 rights offer is being priced at A$28.29 for Rio Tinto Ltd shares and 1400 pence for Rio Tinto Plc shares, a massive discount to Rio's close in Australia at A$73.23 on Tuesday and 2,900 pence on Monday. The money raised will be used to slash $38 billion in debt, which it took on to buy Canadian aluminium group Alcan in 2007 at the peak of the commodities boom. The company also reiterated warnings that its trading outlook for the rest of the year remained uncertain due to pricing of its main commodities and that ongoing price negotiations with Chinese customers for iron ore could have an impact on its profits. "A reduction in the imports of the group's products by Chinese customers has had, and may continue to have, a material adverse affect on the group's results of operations," the company said.