S&P Strips Exxon of Triple-A Credit Rating

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 [e-mail]

(END) Dow Jones Newswires

April 26, 2016 12:55 ET (16:55 GMT)

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