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Anglo cut to junk for third time this week on S&P downgrade

Feb 18 2016 19:05
Thomas Biesheuvel

(iStock)

Company Data

ANGLO AMERICAN PLC [JSE:AGL]

Last traded 164
Change -4
% Change -2
Cumulative volume 1569232
Market cap 0

Last Updated: 26-09-2016 at 03:32. Prices are delayed by 15 minutes. Source: McGregor BFA

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London - Anglo American’s [JSE:AGL] credit rating was cut to junk by Standard & Poor’s, following similar downgrades by Moody’s Investors Service and Fitch Ratings this week, amid questions about the miner’s ability to sell assets.

The company’s rating was reduced to BB from BBB- with a stable outlook, S&P said in a statement on Thursday. Moody’s cut Anglo to Ba3, and Fitch lowered the rating to BB+ earlier in the week.

Anglo, which became the first major London-based miner to be rated junk, has said it’s looking to speed up sales of coal and iron ore assets after losses bled into a fourth year.

It’s trying to engineer a turnaround by focusing on its best mines that produce diamonds, platinum and copper. The company wants to raise $4bn from mine sales and cut net debt to less than $10bn this year.

On Tuesday, Anglo added mines including coal in Australia and nickel in Brazil to an already long list of assets for sale as it seeks to scale back its $12.9bn debt.

Chief executive officer Mark Cutifani expects to sell 10 assets by the first half of 2016 and because there are so many up for sale, Anglo wouldn’t be forced to accept any offer, he said.

Very uncertain

Although the programme should enable Anglo to lower its debt levels, the depressed market means that we view the proceeds and timeline as very uncertain,” S&P said in the statement.

“Because other companies are also seeking to divest assets at this time, we remain very cautious about the timing of any sales and the level of proceeds they will generate.”

Goldman Sachs Group said on Tuesday that the miner’s plan to sell off assets was “ambitious” in such a tough environment. Bank of America questioned whether the market trusted the management team to execute sales, while Citigroup said the process was coming too late.

Anglo said earlier this week that it had a “strong liquidity” position with about $15bn in cash and undrawn facilities with only $1.6bn of bonds maturing this year.

In the medium term, the company wants to reduce its debt to $6bn and return to an investment-grade rating, the company said on Tuesday.

The Moody’s downgrade has no impact on the business, chief financial officer Rene Medori said on a call after the results were announced. He reiterated that Anglo has no plans to raise money by selling new shares.

Anglo lost three-quarters of its market value last year as metal prices sank to a six-year low. The stock slumped 5.9% to 440.4 pence by 10:39 in London. It’s still up 47% this year, making it the best performer in the benchmark FTSE 100 Index.

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anglo amercian  |  ratings agencies  |  mining

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