BHP Bil­li­ton's credit rat­ings frag­ile in FY16, agen­cies warn

The Pak Banker - - BUSINESS -

MEL­BOURNE: BHP Bil­li­ton's in­vest­ment-grade credit rat­ings might come un­der pres­sure in the cur­rent fi­nan­cial year, rat­ings agen­cies said on Wed­nes­day, af­ter the top global miner posted its weak­est profit in a decade but still hiked div­i­dends.

While BHP has long sought to pro­tect its ' A+' rat­ing by Stan­dard and Poor's and 'A-1' rat­ing by Moody's, it re­it­er­ated a pledge on Tues­day to never cut its div­i­dend through the highs and lows of com­mod­ity price cy­cles. But both rat­ings firms said that with com­mod­ity prices likely to re­main weak in the fis­cal year to June 2016, the com­pany's debt to earn­ings bal­ance may tem­po­rar­ily put it out of the range needed to hold on to its rat­ings.

S&P said its 'A+' rat­ing could with­stand a dip in earn­ings ra­tios as long as the agency be­lieved those met­rics would re­cover by the fol­low­ing fis­cal year. "Should the weak trad­ing en­vi­ron­ment per­sist fur­ther, the re­cov­ery in credit met­rics is un­likely to oc­cur based on BHP Bil­li­ton's earn­ings alone," it said. Both agen­cies said even with BHP's sharp cut in cap­i­tal spend­ing and plans to pare costs be­yond the $4.1 bil­lion al­ready slashed in the 2015 fi­nan­cial year, fund­ing the div­i­dend from cash flow would be a chal­lenge if com­mod­ity prices wors­ened. "This would place fur­ther pres­sure on credit met­rics and the rat­ing," Moody's said.

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