Johannesburg - There was more grief for Anglo American yesterday when international ratings agency Fitch Ratings downgraded its credit ratings to “junk” status.
The Fitch downgrade comes two days after Moody’s Investors Service took similar steps, citing that commodity prices have damaged the company’s ability to pay down its debt.
On Tuesday, Anglo said it planned to sell assets, including coal and iron ore, as it cut its core assets to 16 from 45 across three business units to focus on diamonds, platinum group metals and copper.
The company said its losses had doubled to $5.62 billion (about R88.4bn) in 2015 as commodity prices plunged, pressuring Anglo’s balance sheet already weighed down by $12.9bn in debt.
Anglo said it wanted to raise $4bn from selling mines and reduce net debt to less than $10bn this year.
Fitch said yesterday that it had downgraded its rating on Anglo American to BB+ from BBB- due to uncertainty about the execution of the company’s restructuring plan.
“The negative outlook primarily reflects the high level of uncertainty regarding the ultimate success of the group’s restructuring plan,” Fitch said. With several of Anglo’s available assets being marginally profitable or making a loss, “this raises the question of whether they will attract a purchase multiple that is acceptable” to management, it said.
Ratings agency Moody’s said on Monday that Anglo faced a higher risk due to deteriorating commodity markets conditions, and a longer and more uncertain period than previously expected.
Chief financial officer Rene Medori said after the results were announced on Tuesday that Moody’s downgrade did not take into account the company’s restructuring plan.
Medori reiterated that Anglo had no plans to raise money by selling new shares.
Goldman Sachs said yesterday that Anglo’s plan to sell off assets was “ambitious” in such a tough environment.
Anglo’s share price gained 9.44 percent on the JSE yesterday to close at R97.36.
* With additional reporting by Bloomberg
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