Fortescue's recently announced debt restructure removes the financial covenant pressure under its bank loan facilities. Under our forecasts, the company's financial metrics will weaken over 2013 before increased production underpins an improvement in 2014 back to levels commensurate with the 'BB-' rating. We think the weaker financial metrics in 2013 increase the company's vulnerability to lower ore prices, higher operating costs or delay in production ramp up. As such, we have affirmed the corporate credit rating at 'BB-' and removed it from CreditWatch negative. Nevertheless, the rating outlook is negative. We also lowered our recovery rating on Fortescue's senior unsecured debt to '5' from '4', as the debt ranks behind the company's recent US$4.5 billion senior secured facility. As a
