Moody’s upgrades Vale, debt

Moody's Investors Service said it upgraded Vale SA's ratings and related ratings, including Vale's senior unsecured rating and the ratings on the foreign currency debt issues of Vale Overseas Ltd. (fully and unconditionally guaranteed by Vale), to Ba2 from Ba3.

The agency also upgraded the rating for the senior unsecured ratings of Vale Canada Ltd. to B1 from B2.

The outlook is positive.

In addition, Moody's America Latina Ltda upgraded the corporate family rating assigned on its Brazilian national scale to Vale and the senior unsecured notes issued by Vale to Aa2.br from A2.br. The outlook is positive.

Moody’s said the upgrade to Ba2 reflects the substantial recovery in credit metrics observed during 2016, supported by Vale's improvements in production profile, its low-cost structure and financial discipline regarding capital expenditures and dividends, which enhanced the company's operating resilience and overall liquidity.

The recovery in credit metrics is also a consequence of higher commodities prices, in particular iron ore, which increased by 81% and closed 2016 at $78.9/ton. EBITDA margins for fiscal year 2016 were at 43.4% (56.9% in fourth-quarter 2016), record levels since 2012. Adjusted leverage, in turn, declined to 2.6 times at the end of 2016, a steep decrease from 5.6 times at the end of 2015.

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