Fitch Sees Vale Strength

Fitch has upgraded Brazilian miner Vale to BBB from BBB minus, crediting an extremely strong financial profile, healthy cashflow from operations in the midst of a severe downturn in commodity prices, and ability to make selective acquisitions. However, that does not mean the company will go unscathed this year. Due to a negative market for many of Vale’s products, particularly nickel, Fitch expects Vale to generate Ebitda at levels substantially below 2008, and possibly less than half of last year. With capital expenditure, dividends, and acquisitions expected to total more than $13bn, Fitch believes net debt could increase to about $11.0bn from $5.1bn at the end of 2008. As a result, the net debt/Ebitda ratio could be in a range of 1.2x-1.4x. However, such ratios remain comfortably within the rating category, Fitch says. “We continue to view Vale as a solid credit with a significant liquidity position, and while we believe upside potential is limited, we expect bonds will continue to tighten with a broader rally,” says Barclays.