Tuesday, February 2, 2016
Commodities crunch sees BHP Billiton hit with rating downgrade
The commodities crunch has dealt a serious blow to the credit risk profile of BHP Billiton.
The ratings agency Standard & Poor's has downgraded BHP's credit rating to A from A plus to reflect changes in forecasts for commodity prices.
In a statement, Standard & Poor's said the decision reflected "very challenging market conditions and increased demand uncertainty over the coming years".
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"Metal prices have come under pressure because of fears of lower demand from China, and excess supply remains an issue," S&P said.
"Particularly relevant for BHP Billiton, the oversupply of crude oil in the market results in very weak oil and gas prices, which we now believe will last over the foreseeable future, putting further pressure on its balance sheet."
S&P has also placed BHP on "credit watch with negative implications" and has signaled the miner's rating could be taken a notch lower after it releases its earnings later this month on February 23.
BHP responded to the downgrade saying it "has the strongest credit rating in the sector and remains committed to maintaining its strong balance sheet through the cycle."
The S&P downgrade comes as BHP struggles to maintain its progressive dividends to shareholders in the face of global turmoil and falling commodity prices.
BHP chairman Jac Nasser late last year refused to guarantee the progressive dividend would survive but said it as an "important distinguishing feature" for the company.
BHP maintains an A plus credit rating at Fitch Ratings and an "A1" assessments at Moody's which has the miner on review for a downgrade.
The miner's shares have plunged as result of the commodities crunch and fears about China's economy.
BHP shares ended 0.65 percent lower yesterday at $15.25