Moody’s downgrades BHP Billiton

Mining giant BHP Billiton’s credit rating was downgraded by rating agency Moody’s to A3 from A1 amid a prolonged commodity price slump. The move follows a rating downgrade conducted earlier by S&P.

The downgrade adds to its disappointing first-half results where the company recorded losses of $5.6bn, mainly on write-downs of its U.S energy assets. The dismal earnings also led to the suspension of its dividend policy.

Price of iron ore, the commodity which accounts for a large chunk of BHP’s earnings, was down more than 70% since its peak in 2011 of nearly $192 a metric ton.

The firm has struggled with the outcome of a pending claims settlement case related to its investment in Samarco Mineracao, a Brazilian mining firm, formed by 50:50 JV with Vale S.A. Samarco faced a lawsuit in Brazil related to its dam bursting incident in which state authorities seek a compensation of upto BRL 20bn ($5bn). However, a statement released by JV partner Vale states that an agreement with the Brazilian authorities could allow the companies to pay BRL 9.6bn in compensation by 2030.

Source: WSJ

 

 

 

 

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