A year and half after it was downgraded to junk, Anglo American has won back its investment-grade status.
S&P Global Ratings said it has upgraded its rating on the London-based miner to BBB- from BB+ citing recent strong results and higher commodity prices.
“Anglo recently published strong financial results for the first half of the year, reflecting the rebound in commodity prices, in particular for iron ore and coking coal,” S&P said in a statement.
Anglo, which celebrates is 100th birthday this year, lost its coveted investment-grade status in February 2016 during a savage downturn in commodity markets that brought some of the biggest names in the industry to their knees
Anglo was among the hardest hit during the price rout and responded with a dramatic shrink-to-survive programme.
Aided by higher commodity prices, disposals, aggressive cost cutting and productivity gains, Anglo has since repaired its balance sheet and declared an end to assets sales. Its net debt had fallen by more than 50 per cent since the end of 2015 and now stands at $6.2bn.
The FTSE 100 company surprised investors last month with news that it would resume dividend payments six months earlier than expected after meeting its debt reduction targets.
Corporates with investment grade credit rating are able to issue debt to a wider pool of investors and benefit from tighter pricing.
“Based on Anglo’s capex guidance for the coming years, and our view that the company will stick with the base dividend pay-out in the coming 12 months, we expect the company will allocate the excess cash to further reduce reported net debt to about $6bn by the end of 2018.
“The recovery in commodity prices and the rapid reduction in Anglo’s net debt position have led the company to scale back its previous plan to focus on commodities that have strong medium- and long-term fundamentals such as copper, diamonds, and platinum. We understand that some of the valuable assets, such as the Australian hard coking coal mines and the iron ore assets, will remain part of its portfolio, while other small, less-competitive assets will be divested over time. That said, we still see it as possible that the iron ore and coking coal assets could be divested for the right price.”
Shares in Anglo American were down 3 per cent at £12.38 on Friday as investors took profits after recent gains. Anglo has gained 14 per cent over the past month on the back of higher copper and iron ore prices.