Regardless of what BHP Billiton’s board and management might think and some of the company’s Melbourne-based cheer squad in the business media, the Rio Tonto offer is a dying daily and no one has the guts to ask BHP to update the market fully and transparently.

The credit crunch and slowing demand for iron ore and copper and other commodities, the implosion in European and US banking, and the growing toll of big deals being pulled for lack of finance, are sending signals that BHP’s 3.4 share offer for Rio is over.

It is a case of what regulators here and in Europe might think. After the ACC gave it the tick yesterday, BHP shares rose 5.6% by the close. In London they fell 4% because the investors are closer to the yawning black holes in finance across the continent and in the US.

Instead of listening to and reading platitudes from BHP’s chairman, Don Argus, and aggressive speeches from CEO, Marius Kloppers, the ASX and or ASIC should be asking BHP if it’s $US55 billion post bid “committed” finance package is still as firm, given the shaky state of some of the proposed managers and funders.

When European banks prefer to leave $US140 billion (around 100 billion euros) on deposit with the European Central Bank earning 0.75% less than the 4% cash rate in the eurozone, you should be questioning how BHP proposes to convince the same banks to give it the $US55 billion it says it has committed.

Then there’s the advisability of proceeding with a hostile bid in the current climate where the global economy seems to be sliding towards a rather nasty recession and even China is slowing.

I know BHP will answer that the financing is in the future, but bank lending in such large quantities won’t recover for some time, a year or more such as been the damage to the fabric of confidence. BHP is a single A rated corporate, and the banks won’t even lend to double A rated peers at the moment!

The giant US telco ATT said this week it was unable to borrow for any longer than overnight from the markets, such was the nervousness of banks.

Now that will pass, but not the damage to the capital and lending capacity of banks, nor the managerial mindsets. Does BHP really think banks in the US or Europe will lend billions to a foreign company like BHP for an aggressive takeover refinancing, before recapitailising local companies, small businesses and mortgage holders?

BHP says it has a “committed banking financing facility” from a group of banks lead by Barclays Capital, BNP Paribas, Citigroup Global Markets, Goldman Sachs International, HSBC, Banco Santander and UBS.

UBS is a basket case, Santander is bedding down Alliance and Leicester and the parts of Bradford and Bingley it bought at the weekend, Citigroup is coping with taking over Wachovia in the US, (and selling unwanted loans and assets, half a trillion dollars worth); Barclays Capital is swallowing most of the US business of Lehman Brothers and Goldman Sachs is coping with being a fully regulated bank and not an investment bank and is looking to raise capital and nice, safe, boring deposits from individuals and corporates, not extend mega loans to the likes of BHP.

A loan of this size would have been sold off by the managers, but where are the buyers in Europe, Japan or in the US in particular.

But the best signal was the move by the very aggressive Xstrata to abandon its bid for Lonmin in London last night and instead raid the company and pick up enough shares to give it a dominant 33% stake.

The proposed Lonmin offer at 33 pounds a share would have cost Xstrata around 5 billion pounds or 11 billion US dollars. It had 10% of Lonmin and then bought enough to give it the dominant holding at 19 pounds a share.

Xstrata said it did not intend to make a takeover offer for Lonmin because of “extreme volatility and uncertainty in the financial markets”.

The “lack of clarity and certainty regarding the future availability of credit introduces significant risks” into financing for any bid, Switzerland-based Xstrata said in a statement.

Xstrata had lined up a $US15 billion (around $A19 billion) loan from a group of banks to finance the offer and refinance existing debt, but that grew wobbly and the company (which has spent $US28 billion on takeovers in the past four years) grew nervous about rolling over that debt in around a year’s time, and the costs that it would entail in interest rates and fees.

So it walked, raided and will end up getting Lonmin at a time and cost of its choosing, but cheaper. But the Lonmin deal isn’t the only one killed off by the credit crunch and lending freeze.

Last month a private equity group called off a $A4.2 billion offer for UK events publisher, Informa and HSBC bailed out of a year-long effort to buy 51% of the Korean Exchange Bank for $A8 billion after failing to get the deal finalised and with worries about the global outlook.