Glencore credit rating cut to near-junk status
AFP · 18 Dec 2015, 17:29
Published: 18 Dec 2015 17:29 GMT+01:00
- Glencore announces further debt slashing (10 Dec 15)
- Debt-hit Glencore to slash Aussie mine jobs (07 Dec 15)
- Glencore sells silver output to cut debt (04 Nov 15)
Moody's Glencore rating went to Baa3 from its previous Baa2 notation.
"The pricing environment in mining will remain unfavourable in 2016-17, making a return to the previous level of earnings unlikely," said Moody's Glencore lead analyst Elena Nadtotchi in a statement.
Weak metal prices had "significantly reduced the earnings capability" of Glencore's industrial division, she said.
Moody's, however, added that Glencore's ratings outlook was now stable, reflecting confidence that Glencore would adjust its balance sheet and avoid sinking to junk status.
Many institutional investors are barred from holding speculative bonds, also known as "junk" in their portfolios, which is why a downgrade to junk often leads to sharp selloffs in a company's bonds.
Glencore, the world's largest mining company, based in the canton of Zug, widened its debt-trimming plan this month with deep cuts in investment and more asset sales in an effort to cope with a dramatic commodities downturn.
Elsewhere in the sector, mining giant Anglo American has announced a reduction of its workforce by almost two-thirds and Rio Tinto, another major mining player, has announced slashing capital spending.