1st Feb 2016 17:57
LONDON (Alliance News) - Standard & Poor's Monday lowered diversified miner BHP Billiton's credit rating and placed Rio Tinto's rating under review until both sets of miners release their next set of results.
BHP Billiton PLC late Monday said Standard & Poor's has lowered the company's credit rating to A from A+. The FTSE 100-listed miner said the rating on its senior secured notes has been lowered to A from A+ and its subordinated notes to BBB+ from A-.
"BHP Billiton has also been placed on 'CreditWatch with negative implications' and Standard & Poor's has advised it aims to resolve the CreditWatch after the release of BHP Billiton's results for the half year ended December 31, 2015," said the miner.
BHP plans to release its first half results on February 23.
Standard & Poor's said in its own statement Monday that it recently lowered its price assumptions for iron ore, oil and copper, reflecting very challenging market conditions and increased uncertainty over commodity demand over the coming years.
"Under various scenarios, we now forecast that global diversified miner BHP Billiton could see its ratio of funds from operations to debt fall to 30% to 40% over 2016 and 2017, well below our threshold for an 'A+' rating," said Standard & Poor's.
"The CreditWatch placement reflects the possibility that we might lower the ratings by a further one notch after the group's earnings release in late February, largely depending on the announced dividend policy and capital expenditure guidance," Standard * Poor's added.
Standard & Poor's said it previously considered BHP's oil division "set the company apart from other miners" but said that advantage could be lost if oil prices remain at current levels of around USD30 a barrel.
"BHP Billiton demonstrates prudent risk management, in our view, and has a good track record of access to credit markets even during an industry downturn. The company's debt facilities contain no financial covenants," said Standard & Poor's.
BHP added: "BHP Billiton has the strongest credit rating in the sector and remains committed to maintaining its strong balance sheet through the cycle."
In a separate statement Monday, Standard & Poor's said it has also placed Rio Tinto PLC's A-/A-2 long and short-term corporate credit ratings, alongside the long-term issue ratings on the debt
instruments issued or guaranteed by the company, on CreditWatch with negative implications.
"Under various scenarios, we now forecast Rio Tinto's funds from operations to debt could fall to 30% to 35% over 2016-2017, slightly below the 35% threshold commensurate with the existing rating," said Standard & Poor's.
Standard & Poor's said it previously believed Rio Tinto would fall below that 35% threshold in 2016 with some recovery expected in 2017, but said it has "limited visibility" as to how the company might respond to the current challenging environment.
Rio Tinto plans to publish its full year results for 2015 on February 11.
Standard & Poor's highlighted that if Rio Tinto chose to reduce operating or capital expenditure further, or bolstered its asset sales, that those measures "could support the current rating".
BHP shares closed up 0.1% to 676.85 pence per share on Monday whilst Rio Tinto shares closed down 1.1% to 1,696.0p.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
Rio TintoBHP Billiton PLC