BHP Billiton says it remains committed to maintaining its strong balance sheet through the commodities downturn, after ratings agency Moody’s downgraded its rating for the global miner.
Moody’s Investor Services overnight said it had downgraded its credit rating for BHP to “A3” from “A1” citing a deterioration in the company’s earnings and cash flow due to weaker commodities prices.
The move comes after ratings agency Standard & Poor’s in February cut BHP’s credit ratings to “A” from “A+”.
The mining giant on Friday said it had “noted” Moody’s rating revision adding that “BHP Billiton remains committed to maintaining its strong balance sheet through the cycle”.
A slump in the prices of commodities such as copper and iron ore has put the balance sheets of miners across the world under strain.
Moody’s said it had a negative outlook on the rating and that it expected BHP’s credit metrics to remain substantially weaker as the low prices and soft demand fail to offset changes in the miner’s dividend policy.
Last week, the miner abandoned its progressive dividend policy and slashed its interim dividend by nearly three quarters to conserve cash. It had $US25.9 billion ($A35.48 billion) of debt at the end of 2015.
The miner’s five-year credit default swaps, instruments used by investors to insure exposure to a company or country’s debt, were at 182 basis points, according to Markit data. They closed at 194 basis points on Wednesday.
“I think (the deal with the Brazil government is) having a more material impact on the stock,” Macquarie analyst Alon Olsha said, noting that other miners were also gaining due to higher copper prices.
BHP Billiton’s Samarco joint venture will pay up to $US2.3 billion ($A3.15 billion) over six years after reaching a settlement with Brazilian authorities over a deadly dam spill in November.
BHP’s shares, however, were up 1.57 per cent, or 27 cents, at $A17.52 in early trade on Friday.