Fortescue executive churn is ‘credit negative’ says ratings agency

afr.com:

Ratings agency Moody’s says Fortescue’s high rate of executive turnover is negative for its credit rating, but expressed confidence the iron ore miner had significant headroom to fund its pivot into clean energy.

Fiona Hick started as Fortescue chief executive in February and left last month. Tertius Pickard

Moody’s reaffirmed Fortescue’s “Ba1” credit rating on Tuesday, saying the company’s track record of sequentially growing iron ore sales volumes had given it “very strong credit metrics”.

But Moody’s expects Fortescue’s balance sheet to come under more pressure as it prepares to take “at least” five final investment decisions on clean energy projects before Christmas.

Fortescue had net debt of $US1.03 billion ($2 billion) at June 30 and Moody’s said debt levels would “likely increase” as Fortescue allocated capital to its clean energy projects at a time when Chinese demand for iron ore is expected to soften.

“The ultimate projects selected, as well as the scale and funding requirements for the projects remains uncertain. However, Moody’s expects that these projects could materially increase the company’s capital expenditure requirements and increase debt levels over the next several years,” said the ratings agency in a note to clients.

Moody’s said Fortescue’s debt-to-earnings ratio could double over the next 18 months, but would still remain below the ratings’ agency’s “tolerance level”, giving Fortescue “significant headroom” in case iron ore prices slumped or costs rose.

Fortescue has been plagued by executive turnover in the past three years, with only one of the core leadership team presented in the 2020 annual report – lawyer Peter Huston – still in their role today.

“Moody’s considers elevated turnover at the