SYDNEY--Standard & Poor's Ratings Services cut Fortescue
Metals Group Ltd.'s corporate credit rating, cautioning the
Australian miner was facing considerable challenges from a sharp
downturn in the iron-ore market.
Fortescue--the world's fourth-largest iron ore exporter by
volume--has been scrambling to rein in spending as it grapples with
tumbling iron ore prices, which have fallen more than 60% since the
start of last year.
On Wednesday, S&P lowered Fortescue Metals Group's credit
rating to BB from BB+, with a negative outlook. It meanwhile
lowered ratings on its senior secured debt to BBB- from BBB, and on
its unsecured debt to BB- from BB.
"The downgrades reflect our expectation that Fortescue's
financial risk profile will weaken significantly in the next two
years due to low iron-ore prices," said analyst May Zhong.
Fortescue last week faced downgrades from rival ratings firm
Moody's, which warned of a "substantial weakening" in store for the
company's earnings and credit.
Executives have sought to reassure investors the Australian
miner can survive the sharp downturn in prices, this month
reporting sharply lower production costs and saying Fortescue
continues to generate a profit from its mines.
Ms. Zhong said S&P's new BB rating was reliant on the
company's ability to drive down costs and keep its operations
profitable. "Fortescue's credit metrics could fall below our
current expectation if there is any misstep in reducing its cash
production cost or there is any unfavorable foreign exchange
movement," she said.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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