Anglo American Reduced to BBB by S&P on Spending Program, Debts

Anglo American Plc (AAL) was downgraded by Standard & Poor’s on concern the miner’s capital spending and dividend payments will erode cash flow and boost borrowings.

“We expect Anglo American to generate much more negative discretionary cash flow in 2013-2014 than we had assumed, which should in turn result in higher adjusted debt,” S&P said today in a statement. It reduced Anglo’s rating to BBB from BBB+, the second-lowest investment grade.

The mining company, which swung to a loss last year after writedowns, has sunk 27 percent in 12 months in London trading. Cynthia Carroll quit as chief executive officer in October after Anglo lost about $14 billion in value during her tenure and suffered cost blowouts and delays at an $8.8 billion iron-ore project in Brazil. Mark Cutifani took the helm yesterday.

In February, Anglo increased its dividend by 15 percent to 53 cents a share, citing an improving outlook for commodity demand. Net debt was $8.6 billion at the end of last year.

S&P has a stable outlook on Anglo, it said in today’s statement. The stock was up 1 percent at 1,667 pence as of 10:33 a.m. in London.

To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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