Post says Teck drifts toward junk-debt status

2015-07-24 06:31 PT - In the News

The Financial Post reports in its Friday edition Teck warned shareholders Thursday it could lose its investment-grade credit rating if commodity prices keep falling. The Post's Peter Koven writes the miner does not plan to take any extreme action to prevent a downgrade. "We will not issue equity to buy back debt to defend the rating," chief executive officer Don Lindsay told investors on a call. He added Teck does not want to issue equity "anywhere near" its current stock price. Teck's shares dropped below $10 for the first time since 2009. Teck did surprise the market with strong second quarter earnings, but investors were concerned about a possible credit downgrade and writedowns if metal prices keep going down. S&P, Moody's and Fitch Ratings all rate Teck at the lowest investment-grade level, while DBRS has it one notch higher. Last month, Moody's said Teck's credit rating would be jeopardized, however, if low steelmaking coal prices persist for too long. Spot prices were around $85 (U.S.) at the time; they are barely above $80 (U.S.) today. A downgrading to "junk" status would mean future borrowing costs would increase. Teck, however, will probably not have to borrow more money any time soon.