14 Aug 2015

Fonterra's debt not only reason for credit watch

10:36 am on 14 August 2015

International ratings agency, Standard & Poor's, says Fonterra's high debt is part of the reason why it has been put on credit watch.

Fonterra has been put on notice that its credit rating is under review and could be cut.

As well as a high level of debt, Standard & Poor's is also citing a weakening market for its move which has negative implications for Fonterra's current debt rating.

A Standard & Poor's credit analyst, Brenda Wardlaw, said it would make a decision on the rating after looking at the co-operative's full year results.

She said the move followed the dairy giant's lowering of its forecast milk price last week, which was slashed to $3.85.

Agribusiness commentator Keith Woodford said being placed on negative credit watch was not a disaster for Fonterra but would make it more expensive to borrow money.

"It's symptomatic that things aren't very good at Fonterra at the moment, but it's not a crisis. at this stage it's just a warning."

Fonterra responded to the agency's announcement and said it had taken proactive and positive steps to maintain its financial strength.