Glencore Credit Rating Cut to Lowest Investment Grade at S&P

  • Rating lowered to BBB- with stable outlook on commodity prices
  • S&P sees ratings `headroom' on further Glencore asset sales

Glencore Plc’s credit rating was cut to the lowest investment grade at Standard & Poor’s as the assessor downgrades a raft of commodities producers following a rout in prices.

The company’s rating was cut to BBB- from BBB because of lower forecast prices for key commodities such as copper, S&P said in a statement. The downgrade reflects “the very challenging market outlook and the increased uncertainty about demand,” it said, adding that the outlook on Glencore’s rating was stable.

A Glencore spokesman declined to comment. S&P’s move follows a decision by Moody’s Investor Service in December to cut the miner’s rating to the lowest investment level. S&P said Glencore’s financial profile in 2015 was well below its expectations. 

The company’s commodity-trading division needs to do more to offset weakness from its mining operations, Simon Redmond, director of corporate ratings for commodities at S&P, said in a Bloomberg Television interview on Wednesday.

The rout in commodity prices has eroded profits for the biggest miners and forced them to do more to protect their credit ratings. Glencore’s billionaire Chief Executive Officer Ivan Glasenberg has scrapped dividend payments, sold new shares and flagged asset sales to help cut its $30 billion debt load. The company said in December that it planned to reduce debt to as low as $18 billion by the end of this year.

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

Glencore shares gained 5.9 percent to 91.01 pence by 1:33 p.m. in London.

BHP Billiton Ltd., the biggest mining company, this week had its rating lowered one step by S&P to A, a level unseen since 2003.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.

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