S&P Strips Exxon of Triple-A Credit Rating
April 26 2016 - 1:10PM
Dow Jones News
Standard & Poor's Ratings Services downgraded Exxon Mobil
Corp., the world's largest publicly traded oil company, stripping
it of its triple-A rating after more than 66 years with the
pristine mark.
Exxon was one of three American companies—alongside Microsoft
Corp. and Johnson & Johnson—that had retained the top ranking.
On Tuesday, Exxon was downgraded by one notch to double-A-plus. It
has had a triple-A rating since 1949.
Investors rely on ratings from S&P, Moody's Investors
Service and Fitch Ratings when deciding whether to buy bonds. The
downgrade itself isn't expected to seriously impact Exxon's ability
to raise new funds. U.S. government debt itself is ranked at
double-A-plus.
"Nothing has changed in terms of the company's financial
philosophy or prudent management of its balance sheet," Exxon
spokesman Scott Silvestri said.
Shares of Exxon recently rose 0.6% to $87.85.
S&P, in its downgrade Tuesday, said Exxon's debt level has
more than doubled in recent years and that dividend payments and
share repurchases "substantially exceeded" internally generated
cash flow. Earlier this year, Exxon sold $12 billion of new bonds
in one of the biggest corporate-debt deals of the year.
S&P also said it expects Exxon to return cash to
shareholders instead of reducing its debt.
Energy companies have suffered from a prolonged decline in oil
and natural gas prices, with many severely cutting planned capital
expenditures.
In February, S&P cut the ratings of 10 U.S. oil and gas
exploration and production companies, citing the price decline. It
also placed Exxon on watch for a possible downgrade, which was
resolved with Tuesday's release. S&P said Exxon's outlook is
stable.
The financial ratings industry has been under criticism in
recent years stemming from the high-marks given to mortgage-backed
securities, whose failure later caused the financial crisis. In
Feb. 2015, S&P agreed to pay $1.5 billion to resolve litigation
alleging it knowingly issued rosy grades of risky mortgage bonds
before the crisis.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
April 26, 2016 12:55 ET (16:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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