Singapore 15/02/2016 - Standard & Poor’s has cut the corporate credit rating of Freeport-McMoRan Inc to junk and assigned a negative outlook for the company’s new rating, amid concerns that commodity price volatility could derail its operating plan.
S&P on Friday lowered Freeport’s corporate credit rating by two levels to BB from BBB-, noting weaker-than-expected credit measures at the company.
The company continues to refine its operating plan, which includes significant cost and capital spending reductions, as well as increases in copper, gold, and oil production, but there is execution risk associated with its updated operating plan, said S&P.
“The rating is heavily dependent on strengthening credit measures over the next twelve months to avoid our downside triggers, and the negative outlook is an acknowledgement that the plan ahead is aggressive and could be derailed by commodity price volatility and delays," said S&P credit analyst Chiza Vitta.
S&P has cut its copper price assumptions for 2016 by 12.5 percent to $2.10 per pound, while also lowering its gold and oil and gas price assumptions for the year.
On Monday, Freeport had announced plans to sell a 13 percent interest in its Morenci copper mine in Arizona in the US to Japan’s Sumitomo Metal Mining for $1 billion in cash, so as to pay down its debt.
The company had said in January that it was discussing with third parties regarding potential asset sales to accelerate its debt reduction plan.
Metal producers and traders including BHP Billion and Noble Group have been facing credit rating cuts as they struggle to pay down debt, amid the global commodity price slump.
(Editing by Martin Hayes)