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BHP rating downgraded on commodities rout -

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MICHAEL BRISSENDEN: The commodities crunch has dealt a serious blow to the credit risk profile of BHP Billiton.

The global ratings agency Standard and Poor's has this morning downgraded BHP's credit rating to reflect changes in forecasts for commodity prices.

With more on the downgrade I'm joined by our business editor Peter Ryan.

Peter, how significant is this downgrade for BHP?

PETER RYAN: Well Michael this is where the downturn really starts to bite for BHP, its rating downgraded to A from A+ so still in the top ranking.

S and P cites global issues - metals prices under pressure, lower demand from China.

The oversupply of crude oil means weaker oil prices and S and P says that could put pressure on BHP's balance sheet over the foreseeable future.

But it could get worse - BHP is now on credit watch negative from S and P and unless BHP ramps up confidence in its earnings later this month there could be another downgrade.

MICHAEL BRISSENDEN: So how has BHP reacted to the downgrade given the pressure they're facing over maintaining a dividend to shareholders?

PETER RYAN: Well BHP says it still has the strongest credit rating in the sector and remains committed to maintaining its strong balance sheet.

But that progressive dividend is a sensitive matter for shareholders but BHP is now under pressure to maintain that commitment.

Fat Prophets Resources analyst David Lennox says it looks as though BHP might have to bite the bullet.

DAVID LENNOX: We certainly think that for the half year they will probably pay out half of last year's full year dividend. And then we would expect perhaps that the full year result come August that the company will then look at what it will do.

It may not now continue to hold to a progressive dividend but perhaps may go to a percentage of underlying profit. That does mean that dividends may become a little variable as profits obviously will vary.

MICHAEL BRISSENDEN: Resource analysts David Lennox.

So Peter the board of the Reserve Bank meets today. Rates are almost certain to remain steady. But it seems at least one bank is moving quietly behind the scenes.

PETER RYAN: Yes we're starting to see more out of cycle rate increases again with the National Australia Bank raising rates on some short term loans for business.

Greater regulatory requirements means higher costs for the NAB and as is often the case, that's passed on to customers.

MICHAEL BRISSENDEN: Business editor Peter Ryan.