Moody’s lifts Fortescue rating on back of iron ore strength

Moody’s Investor Service has upgraded Fortescue Metals Group’s (FMG) credit ratings amid a higher iron ore price.

The investor group has increased FMG’s corporate family rating from Ba2 to Ba1; its senior secured rating from Ba1 to Baa3; and its senior unsecured rating from B1 to Ba2. The firm has also confirmed a stable outlook on all the company’s ratings.

The upgrades have been attributed to the strong iron ore price, which has breached $US80 twice within the past two months.

“Fortescue has been able to capitalise on higher iron ore prices and utilise the incremental cash flow generated to make sustainable improvements to its balance sheet and debt levels,” Moody’s said.

The firm added that the upgrade reflected its expectation that FMG’s ongoing debt reduction would enable it to “maintain conservative financial metrics for the rating” even during lower iron ore prices.

FMG CEO Nev Power attributed the company’s cost reduction to its productivity and efficiency initiatives, with free cash flows adding to its debt repayments.

“We are pleased that Moody’s have acknowledged the strength of Fortescue’s balance sheet through the continued execution of our debt repayment strategy and upgraded the company’s credit ratings, including the senior secured rating which now has an investment grade rating of Baa3,” Power said.

S&P Global Ratings also increased FMG’s credit ratings late last year after the company reduced its debt by another $US1 billion ($1.36 billion).

It raised the company’s credit rating from BB to BB+.

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