S&P takes BHP Billiton´s long-term credit rating off CreditWatch

29th Feb 2016 14:22

(ShareCast News) - S&P took BHP Billiton´s long-term credit rating off CreditWatch following moves by the metals miner to tie its dividend policy more closely to conditions in the marketplace and its own operating performance.That, the analysts argued, "materially" increased the firm´s financial flexibility.The ratings agency announced it was reaffirming its rating on the company´s long-term debt at A/A-1, albeit with a negative outlook.S&P also noted the potential for reputational risk stemming from the bursting of a damn owned by the outfit´s joint-venture in Brazil, Samarco.There was 'downside' potential if an imminent agreement between BHP and Brazilian authorities resulted in a penalty of over 20bn reals, the agency added.However, the outlook remained negative because further weak market conditions and uncertainty around its financial policy might slow the recovery in the company´s metrics in the coming 12 months.It was also a reflection of the uncertainty about the environmental liability surrounding Samarco.Nonetheless, the company was expected to achieve free discretionary cash flows of between $4.2bn and $4.5bn in 2017 and was expected to use a "material portion" of those funds to lower its leverage.That should allow it to increase its funds from operations to debt ratio to 40% by end 2017, up from approximately 32% in 2016.When S&P downgraded BHP´s debt from A it had estimated than even if it eliminated its entire dividend, in the absence of other measures it would not be able to reach an FFO-to-net debt ratio of 40% in either 2016 or 2017.As of 14:41GMT stock in BHP Billiton was 0.60% higher to 720.4p.