Teck Sees Limits to Defending Its Investment-Grade Credit Rating

Teck Resources Ltd., beset by slumping prices for steelmaking coal, copper and zinc, said it will only go so far to prevent its debt from being rated junk.

“Our investment-grade credit ratings continue to be a priority for us,” Teck Chief Financial Officer Ron Millos said Thursday on a conference call. “However, if commodity price moves further against us, there is a limit to what makes sense to defend it.”

Standard & Poor’s and Moody’s Investors Service have cut their outlooks on Vancouver-based Teck over the past month to “negative” from “stable” as commodity prices slid. Canada’s largest diversified mining company, which has about C$10.9 billion ($8.4 billion) of debt outstanding, according to data compiled by Bloomberg, is rated Baa3 by Moody’s and BBB minus by S&P -- one level above junk.

While Teck has moved to strengthen its financial position by cutting costs and boosting the size of its credit facilities, it has no plans to sell shares to reduce its borrowings, said Chief Executive Officer Don Lindsay.

“We will not issue equity to buy back debt to defend the rating,” Lindsay said on the call.

As of the end of the second quarter, Teck had C$6.5 billion of liquidity in the form of cash and credit lines, Lindsay said.

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