The West

New Rio Tinto boss Sam Walsh. Picture: AP.
New Rio Tinto boss Sam Walsh. Picture: AP.

Standard & Poor's has issued a warning to Rio Tinto to rein-in debt and spending by revising the mining giant's credit outlook to "negative".

The credit ratings agency said Rio's leverage had increased beyond its expectations and could rise further unless the company generated cash by offloading assets or the iron ore price stayed well about $120 a tonne.

"We are revising our outlook on Rio Tinto to negative from stable and affirming the 'A-/A-2' corporate credit ratings," S&P said in a statement.

"The negative outlook reflects the risk of a downgrade in the next 12 to 18 months, if debt increases further and funds from operations to debt does not improve to 40 per cent from a relatively low 30 per cent in 2012."

S&P said the negative outlook indicated a one-in-three chance of a downgrade.

The news sends a strong message to new Rio boss Sam Walsh that capex spending may need to be reined-in at least in the short term for the company to maintain its stable credit rating.

Rio shares were off 90 cents, or 1.36 per cent, to $65.25 at 8.10am in a sharply weaker market.

The West Australian

Latest News From The West

Hong Kong-based Gaw Capital Partners has paid about $35 million for Telstra’s ageing Stirling Street headquarters with plans to convert it into student accommodation for more than 500 students.

One of the most senior Rebels bikies in Perth is facing the prospect of prison for high-level drug dealing after being caught in a police sting similar to the one that captured Daniel Morcombe’s …

Popular videos

Our Picks

Follow Us

More from The West