BHP BILLITON has called on seven global banks to provide the crucial $70 billion (£36 billion) needed to fund its planned merger with Rio Tinto, a deal that would create a global mining powerhouse.

Citigroup and Merrill Lynch were originally lined up to finance the audacious deal, but the squeeze on global credit markets has threatened to derail it.

Now Marius Kloppers, BHP’s chief executive, has drafted in Barclays, UBS, Goldman Sachs, HSBC, BNP Paribas and Santander to help finance the takeover and work alongside Citi. Merrill Lynch remains corporate broker to BHP but is no longer providing any financing.

The cash is needed by BHP to refinance the $40 billion loan Rio Tinto raised to buy Canadian mining company Alcan in the summer. A change-of-control clause means BHP has to refinance this facility within 45 days of the deal closing.

The new financing facility will give BHP flexibility to execute a $30 billion share buyback proposed as part of the deal to buy Rio or add a cash element to the current all-share offer. BHP first announced its interest in Rio in November, making an informal offer of three shares for each Rio share.

City sources have claimed BHP must raise this ratio closer to four to one. Sources close to the deal say bankers are working on a compromise of a ratio of 3.5 shares plus £6 per share of cash.

BHP has until February 6 to bid for Rio, or walk away. The deadline was put in place by the Takeover Panel last month.

Rio’s board has rejected the offer. Some mining experts believe BHP will bid on the current terms – meaning the bid will be hostile.

“If we do bid on or before February 6, then barring a change of heart by the Rio board, obviously it will be hostile,” one source close to BHP said. BHP would then hope that a down-turn in the global economy would depress Rio’s share price, making the present offer attractive to shareholders.

Tom Albanese, Rio’s chief executive, told The Sunday Times the current terms were “two ball parks” away from what its directors considered a true value.

Shareholders in BHP have piled pressure on the board of Rio to do a friendly deal. One investor said: “This deal makes compelling commercial sense. Now it is up to both sides to work through the complications and come up with an agreed deal.”

BHP Billiton is likely to sell many of Rio’s small-scale minerals operations if it succeeds with its ambitious £70 billion deal.

As well as its core iron-ore, aluminium and coal operations, Rio has a group of smaller minerals businesses, including the production of salt, borates, titanium dioxide and talc. The BHP executive said they would be unlikely to fit with the combined group.

If a bid materialises, it will have to conform to the rules of both the UK’s Takeover Panel and Australia’s Securities and Investments Commission. Their regulations differ markedly.

But UK takeover rules specify a 60-day timetable for hostile bids. For BHP to proceed, it would need a special waiver from the Takeover Panel.

In Australia, takeover offers can be left open while competition clearance is obtained. But SIC rules stipulate that offer documents must be posted to shareholders one month after a bid is announced, which BHP would like to avoid. Meanwhile, Companhia Vale do Rio has started due diligence on a potential bid for Xstrata.

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