Fitch: No Impact on Vale's Ratings from Purchase Agreement with Bunge

According to Fitch Ratings, yesterday's announcement by Vale S.A. (Vale) that it had entered into a purchase agreement with Bunge Fertilizantes S.A. and Bunge Brasil Holdings B.V. will not impact Vale's ratings. By the terms of the agreement, Vale will pay US$1.65 billion for 100% of Bunge Participacoes e Investimentos S.A. (BPI) and US$2.15 billion for a 42.3% equity stake in Fertilizantes Fosfatados S.A. (Fosfertil). BPI is the second largest producer of phosphate fertilizers in Brazil, while Fosfertil is a leading supplier of raw materials for the fertilizers industry in Brazil.

Fitch currently rates Vales' foreign and local currency Issuer Default Ratings 'BBB' and its national scale rating 'AAA(bra)'. Incorporated into these ratings was Fitch's expectation that Vale would be buying mining companies in the near term as it sought to diversify its mining portfolio, and therefore yesterday's announcement will not require changes to the ratings. Fitch anticipates that Vale will continue to seek growth through acquisitions, as well as the development of its existing mining assets. In the short to medium term, event risk remains high, and Vale's credit quality could be negatively affected by any sizeable transactions.

As of Sept. 30, 2009, Vale had US$13 billion of cash and marketable securities and US$22.3 billion of total adjusted debt, as calculated by Fitch. The company's cash position was increased during November 2009 when the company issued a US$1 billion bond due in 2039. Vale's amortization schedule is manageable with US$3 billion of debt maturing between Oct. 1, 2009 and Dec. 31, 2010. The company faces long-term debt amortizations of US$2.6 billion in 2011, US$1.2 billion in 2012 and US$3.2 billion in 2013. In addition to having a substantial cash position, Vale has US$1.9 billion of undrawn revolving credit lines that it could use to enhance its liquidity. They consist of a US$1.15 billion credit line at Vale International and a US$750 million credit facility at Vale Inco.

During the latest 12 months (LTM) ended Sept. 30, 2009, Vale generated US$8.5 billion of EBITDA and US$12 billion of cash flow from operations (CFFO). These figures are down substantially from the company's 2008 EBITDA of US$17.6 billion and CFFO of US$17.1 billion due to lower prices and volumes, particularly for iron ore. The strong recovery in prices for nickel and aluminum during the second half of 2009, plus increasing demand for iron ore from China and the end of the destocking process in many of the company's markets, should have resulted in an EBITDA figure in excess of US$10 billion during the year ended 2009.

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