South32 Ltd.'s conditional agreement to sell its aluminum value chain assets to Alcoa Corp. for up to US$5.6 billion will weaken the company's scale and diversity. Post-sale, the company's operations will decline to four from eight and the company will no longer have downstream operations. The smaller portfolio will decrease protection against inherent commodity price volatility, in our view. We placed our 'BBB+' long-term and 'A-2' short term issuer credit ratings, and all issue ratings on South32 on CreditWatch with negative implications. The CreditWatch placement reflects the possibility that we could lower the ratings on the Australia-based diversified miner by at least one notch following the loss of scale and diversity. We expect to resolve the CreditWatch before or at
