Singapore 05/02/2016 - Standard & Poor’s has downgraded Glencore’s credit rating to its lowest investment grade citing “challenging market outlook” and increased uncertainty about demand in the mining industry.
On Thursday, S&P lowered Glencore’s long- and short-term corporate credit ratings to ‘BBB-/A-3’ from ‘BBB/A-2’ . The rating is just a notch above the non-investment grade or junk status.
S&P had recently lowered its price assumptions for copper and other metals, reflecting the very challenging market outlook and increased uncertainty about demand.
“These heightened operating risks, reported EBITDA declines, and increased volatility of earnings lead us to a more cautious assessment of global mining company Glencore and its financial leverage,” it said.
The rating agency added that it sees the 'BBB-' rating having “more sustainable headroom, particularly in the prevailing low price environment” while it anticipates significant further debt reduction at Glencore in 2016.
S&P kept its outlook as stable for the company as it believes the Glencore’s meaningful continuing free cash generation, strong liquidity, and active balance sheet deleveraging should mitigate downside risk.
S&P had recently downgraded the bond ratings of commodity producers and traders including BHP Billiton and Noble Group amid the global commodity price slump.