On the rocks

25 November 2008 By John Foley Follow @johnsfoley

The implosion of BHP Billiton’s allstock offer for the rival miner leaves both sides redfaced. But Rio is groaning under a $38bn mountain of debt, its share price in tatters. By leaving its rival in such a tough spot, BHP may have scored a sort of victory after all.

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BHP Billiton said its allstock offer for rival AngloAustralian miner Rio Tinto was no longer in the best interest of its own shareholders, citing falls in commodity prices and the heavy debt load of a potential combination.

Marius Kloppers, BHP's chief executive, said the decision also hinged on the diffculty of making divestments in iron ore and coking coal, which would be necessary for European Union antitrust approval, at a reasonable price.

BHP revealed its intention to bid for Rio in November 2007. It took out a $55bn loan facility from seven banks including Citi, Goldman Sachs, HSBC, Santander and Barclays, partly to refinance Rio's $38bn of net debt.

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