BHP Billiton hit by Moody's downgrade with 'negative' outlook

Having concluded its review of the mining giant initiated in December, Moody’s wrote to clients on Thursday opining the downgrade reflects a deterioration in the company's earnings and cash flow on account of the commodities slump, which has led to “significantly weaker credit metrics.”

The agency views current weak commodity prices and softer demand as an indication of a "fundamental shift" in the operating environment beyond a normal cyclical downturn.

“As a result - and notwithstanding changes to BHP Billiton's dividend policy and capital expenditure plans, which are themselves credit positive developments - Moody's expects BHP Billiton's credit metrics to remain substantially weaker, over the next 12-24 months, than historical levels and to be more appropriately aligned with a rating of A3,” it noted.

Moody’s also said the miners credit metrics will remain at weak levels for an A3 rating for the next 12-18 months, before improving to “more appropriate levels.”

Even the “most resilient and highly-rated companies like BHP Billiton” remain susceptible to the ongoing commodities slump, the agency warned further.