Glencore’s rating downgraded

Glencore has followed BHP’s lead in being downgraded by Standard & Poor’s.

The miner’s credit rating has been hammered in the wake of the continuing mining downturn, and has seen it fall from BBB to BBB – due to lower forecasts for copper, coal, and oil, according to Bloomberg.

The downgrade reflects “the very challenging market outlook and the increased uncertainty about demand,” S&P stated, going on to explain that outlook for Glencore’s rating was overall stable.

“We believe the ‘BBB-’ rating has more sustainable headroom, particularly in the prevailing low price environment, and we anticipate significant further debt reduction in 2016.

 “We expect rating headroom to materially increase over the coming quarters, as we anticipate significant further debt reduction through disposals.”

This is the second major miner to have its credit rating downgraded in the last week, after it lowered BHP’s rating from an A+ to an A.

“Under various scenarios, we now forecast BHP could see its ratio of funds from operations to debt fall to 30-40 per cent over 2016 and 2017, well below our threshold for an ‘A+’ rating,” the ratings agency said.

Standard & Poor’s also put Rio Tinto on watchlist, with the expectation of a potential downgrade, as the miner edges closer to its lowest share price on the ASX since the GFC as its value fell 18.5 per cent over the space of a month.

 

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