Credit rating agency Moody's said this week it has downgraded Vale’s senior unsecured ratings to Ba1, as well as the company’s debt issues. Moody's said it also downgraded Vale Canada’s senior unsecured ratings to Ba2. The credit rating agency said the iron ore producer’s outlook is negative.
Moody’s said all the rating actions took place after a review for what it called a “possible” downgrade for Vale's ratings initiated on Jan. 29 following the Brumadinho disaster, which killed at least 186 people; the death toll is expected to reach 300 people, as many remain missing.
“Vale's downgrade to Ba1 reflects heightened credit risk after its January 25 tailings dam collapse at Brumadinho and the considerable uncertainties associated with the full impact and long-term implications of this labor and environmental disaster for Vale's overall credit profile,” Moody’s said.
The agency also noted litigation exposure and financial liability is likely to persist in the years to come.
“While Vale's robust financial position provides a good cushion against the potential financial impacts, the accident raises concerns from a social, environmental and corporate governance perspective, in particular considering that it occurred a little over three years after Samarco's tailings dam collapse,” Moody’s said.
Moody’s attributed the negative outlook to the amount and timing of future cash outlays related to the incident.
“It also reflects the risks of ongoing investigations about the cause of the accident and responsibilities,” the agency said.