Moody's cuts Teck Resources debt rating to junk

Mon Sep 14, 2015 3:48pm EDT
 
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Sept 14 (Reuters) - Moody's Investors Service downgraded the rating of Teck Resources Ltd to junk on Monday, blaming weak commodity prices and heavy capital spending by the Canadian miner.

Moody's said it was cutting Teck's senior unsecured rating by one notch to Ba1 from Baa3. Teck's ratings outlook remains negative, it added.

Credit downgrades typically drive up the cost of borrowing for companies, as some big investors will only buy investment grade bonds.

"We expect prolonged commodity price weakness and sizable investment spending will cause Teck's financial leverage to remain well in excess of typical investment grade thresholds through at least 2017," Moody's said in a statement.

Prices for Teck's main commodities, coal and copper, have fallen sharply in recent years and show few signs of a quick turnaround.

The agency said it expects Vancouver-based Teck will burn through C$1.5 billion ($1.13 billion) in cash in 2016 and C$1 billion in 2017 as it presses ahead with the Fort Hills oil sands project, where it holds a minority stake.

Teck's shares were down 2 percent on the Toronto Stock Exchange at C$8.50 after the rating cut.

($1 = 1.3263 Canadian dollars) (Reporting by Nicole Mordant in Vancouver; Editing by Chris Reese)