S&P downgrades Exxaro

Standard & Poor’s said it lowered the long-term South Africa national scale rating on Exxaro Resources Ltd. to zaBBB+ from zaA-.

The agency also said it affirmed the company’s zaA-2 short-term national scale rating.

S&P also said it removed all of the ratings on Exxaro from CreditWatch with negative implications, where they were placed April 13.

The downgrade follows the recent significant drop in the iron ore price to about $50 per metric ton from $70 per ton at the end of 2014, the agency said.

This is set to impact dividend flows to Exxaro from Sishen Iron Ore Co., which contributed about 50% of Exxaro’s EBITDA in past years, S&P said.

The agency said it assumes that Sishen Iron has limited flexibility to ensure continued dividend flows given the challenging operating environment and the company’s capital expenditures.

The ratings also reflect the company’s strong market position in the coal industry generally prudent financial policy objectives, S&P said.

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