Investors lighten Rios debt load

Rio Tinto says it has completed one of the world's biggest rights issues now Australian shareholders have taken up almost 95 per cent of their entitlements to new shares.

Yesterday, the debt-laden mining company reported that its larger United Kingdom shareholder base had taken up almost 97 per cent of the $19 billion rights offer.

Rio Tinto is raising money to pay down the debt it accumulated when it bought the Canadian aluminium group Alcan in 2007.

ANZ resources economist Mark Pervan says the support from the UK investors is a good sign.

"This was a large rights issue in the order of $US15 billion so I think they've done well to get to that acceptance level when you consider that there's still a fair bit of uncertainty, a lot of shareholders still unsure," he told ABC TV's Lateline Business.

"It puts them in a much better position balance sheet-wise. I think it's a good outcome."

Rio rejected a $24 billion bailout by Chinese resources giant and major shareholder Chinalco in early June.

It is now raising the money to plug a $38 billion debt hole created by the purchase of Alcan at the top of the commodities market.

There is still a long way to go before Rio is free of all its debt worries; $7.2 billion expected from the BHP iron ore joint venture still requires regulatory approval.

There is no certainty it will be approved, with some customers and the European regulators opposing the venture. The final nods are unlikely to happen before next year.

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Fri 3rd July 2009 - 10:23am