Anglo American credit rating cut to junk for third time this week

Standard & Poor’s became the latest ratings agency to downgrade the miner, whose credit rating was cut to junk by Moody’s on Monday and by Fitch on Wednesday.

S&P cut the rating to BB from BBB- with a stable outlook. Fitch had cut it to BB+ from BBB-, while Moody’s had downgraded it three notches to Ba3.

On Tuesday, the miner posted a pre-tax loss of $5.5bn after $3.8bn of writedowns since the half year, as it unveiled its promised “radical” overhaul to combat sinking commodity prices.

The company announced a new focus on diamonds, platinum and copper, with the total target for the disposals increased to $5-6bn by the end of 2016.

S&P said on Thursday: “Although the program will improve Anglo's overall competitive position, it will leave the company with a smaller, less-diversified portfolio.

“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.”

S&P said the rating action followed the recent revision in its price assumptions for commodities, which indicate the operating environment will remain difficult for a prolonged period of time.

“Many of the company's noncore assets now generate negative free operating cash flow (EBITDA minus capex). These factors, combined with the high proportion of Anglo's profits that it generates in South Africa, mean that we now view the company's business risk profile as being at the lower end of the satisfactory range.”