Moody's upgrades Vale

Moody's Investors Service said it upgraded Vale SA's senior unsecured ratings to Ba1 from Ba2, along with the ratings on the debt issues of Vale Overseas Ltd., which are fully and unconditionally guaranteed by Vale.

Moody's also said it upgraded the rating for the senior unsecured ratings of Vale Canada Ltd. to Ba3 from B1.

The outlook also was changed to stable from positive.

The agency also said it upgraded Vale's corporate family rating to Ba1 from Ba2 and to Aaa.br from Aa2.br, and the senior unsecured notes issued by Vale to Ba1/Aaa.br from Ba2/Aa2.br.

The outlook is stable.

The upgrades reflect its strengthening credit profile, supported by the execution of debt reduction, positive free cash flow generation and sound liquidity position, Moody's said.

The company will continue to benefit from increased operating efficiency and rising production levels as the S11D operation unfolds as well as lower capital spending needs and reduced dividend payments compared to prior years, the agency said.

The combination of lower debt levels, greater production capacity and a lower cost operation will furthermore allow the company to uphold a more robust position against potential commodity price volatility.

The ratings continue to be supported by the company's diversified product base and competitive cost position, Moody's said, and substantive portfolio of long lived assets.

While Vale has diversified its geographic footprint through various acquisitions, its dominant revenue, earnings and cash flow driver continues to be its Brazilian-based iron ore operations and its major position in the seaborne iron ore markets, the agency said.

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