Credit rating agency Moody’s has upgraded both Vale’s senior unsecured ratings and the company’s ratings on the debt issues of Vale Overseas Limited to Ba1 from Ba2, it said this week. The company’s outlook, however, was downgraded to stable from positive.
Moody's América Latina has also upgraded Vale's corporate family ratings to Ba1 at a global global scale from Ba2 and to Aaa.br from Aa2.br at a national scale. The outlook for all ratings is stable.
“The upgrade of Vale's ratings reflects its strengthening credit profile, supported by the execution of debt reduction, positive free cash flow generation and a sound liquidity position,” the credit rating agency said, adding it will continue benefiting from “increased operating efficiency and rising production levels as the S11D operation unfolds.”
Moody’s noted Vale’s lower debt levels, combined with greater production capacity, thanks to its S11D iron ore mine, and lower-cost operation will allow it to cope with volatile commodity prices.
“With no major expansion projects planned in the near-term, Vale will direct strong cash generation to reduce debt levels,” it said.
Moody’s said the stable outlook on the ratings reflects its expectation that Vale will “further reduce debt levels, and maintain its ongoing focus on cost efficiency, with financial discipline regarding capex and dividend payment that will allow the company to become more resilient and to withstand the volatility of commodity prices.”