London 02/02/2016 - Standard & Poor’s (S&P) has cut BHP Billiton’s credit ratings to A from A+ and placed Rio Tinto on CreditWatch negative amid low commodity prices and demand uncertainty.
S&P had recently lowered its price assumptions for copper, aluminium iron ore and oil, reflecting very challenging market conditions and increased demand uncertainty over the coming years, the credit rating agency said on Monday.
It forecasts that BHP could see its ratio of funds from operation (FFO) to debt fall to 30-40 percent over 2016 and 2017, well below its threshold for an A+ rating.
It also placed BHP on CreditWatch with negative implications, which reflects the possibility that S&P 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.
In response, BHP said in a Monday statement that it has the strongest credit rating in the sector and remains committed to maintaining its strong balance sheet through the cycle.
Last month, rating agency Moody’s said it was reviewing BHP’s ratings for a possible downgrade due to the persistent weakness in commodity prices.
On Monday, S&P also placed Rio Tinto on CreditWatch with negative implications due to commodity price pressures and demand uncertainties.
It forecasts Rio Tinto's FFO to debt ratio could fall to 30-35 percent over 2016-2017, slightly below the 35 percent threshold commensurate with the existing rating.
The CreditWatch placement reflects the possibility that S&P might lower the rating by one notch after the earnings release in early February.
S&P and Moody’s had recently downgraded the bond ratings of major commodity trader, Noble Group, to junk on liquidity concerns amid the global commodity price slump.