VANCOUVER (CP) -- Moody's lowered Teck's senior unsecured rating to Baa3 from Baa1 and assigned a negative outlook.
The agency placed Teck's Baa1 senior unsecured rating under review for possible downgrade in July after Teck made the $14-billion offer for Fording.
It said Thursday the lower rating "reflects Teck's substantially increased debt burden as a result of the Fording acquisition; the significant drop in base metal prices, which materially reduces the amount of debt that can be repaid over the next year; considerable capital investment commitments over the next several years, particularly for the development of its oil sands investments; and the company's poor liquidity position."
Teck president and CEO Don Lindsay said recently that paying off debt is the company's "absolute No. 1 priority" and that it will make cuts across all of its businesses and could sell assets to help pay down its huge debt load created by the Fording deal.
Teck paid $12.4 billion in cash plus shares worth about $C1.5 billion for Fording, a Calgary company which holds a 60% interest in the metallurgical coal operations of the Elk Valley Coal Partnership. Teck owns the other 40 per cent.
As the credit crunch spread and markets began to meltdown, investors worried Teck might not be able to come up with the $9.8 billion in loans it needed to fund the deal.
(c) The Canadian Press