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Fitch affirms BHP Billiton at 'A+'

22 September 2017 08:24

Fitch Ratings has affirmed BHP Billiton's long-term issuer default rating at 'A+'. The outlook is negative.

Fitch said the affirmation was supported by the recovery in BHP's financial performance on the back of stronger than expected results and cash-flow generation since mid-2016, and steps taken by the company to strengthen its balance sheet.

Fitch said the group ha dused free cash-flow generation from the recovery in commodity prices to reduce leverage from 3.4x in the financial year to June 2016 (FY16) to around 1.9x(E) in FY17.

Fitch said: 'We view the recent announcement regarding the classification of BHP's US shale assets as non-core as being credit-negative for the company's longer-term business profile as the sale of these assets would take away a material portion of the expected future growth in BHP's petroleum division.'

Fitch said the negative outlook reflected the emergence of several factors which if realised could result in a lower rating.

It said: 'In addition to a potentially weaker operating profile if the US shale assets are sold (weaker future growth profile, reduced commodity diversification), we are concerned that the presence of an activist shareholder on the company's register could result in an increased level of shareholder-friendly measures such as share buybacks and/or special dividends.

'Such a move could introduce a higher level of volatility to BHP's credit profile and lead us to reconsider the ratings benefit we have historically given the company for its stable financial policies and credit profile.'

At 8:24am: (LON:BLT) BHP Billiton PLC share price was -30.25p at 1313.75p

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