Ratings agency Standard & Poor's could force BHP Billiton's hand on its controversial dividend policy after lowering the resources giant's credit rating by a notch and putting it on negative watch.
S&P also placed BHP's rival Rio Tinto on negative watch to reflect the challenging conditions in the commodities markets.
The agency cut BHP's long-term credit rating from `A+' to `A' and warned it could be lowered further if the company continues with its progressive dividend policy while its cash flows are pressured by lower commodity prices.
"Under our revised assumptions, we forecast a material drop in BHP Billiton's results in the coming 18 months, with key credit metrics well below the levels we consider to be consistent with an 'A+' rating," S&P said in a statement on Tuesday.
It said metal prices had come under pressure due to fears of lower demand from China, and excess supply. But oversupply in the crude oil market had resulted in very weak oil and gas prices, putting further pressure on BHP's balance sheet.
S&P said the ratings decisions reflected its sharply lower price forecasts for commodities.
BHP has been reeling as prices for all its major products have plunged to multi-year lows.
In January, the world's biggest miner lowered its iron ore production target and flagged a further $1 billion hit to its bottom line, after earlier writing down $US7.2 billion ($A10.41 billion) in the value of its US shale assets.
In recent months, the company has spoken about preserving financial strength to ride out the downturn but has stuck to its policy of holding or increasing its dividend at every result, despite pressure from investors and analysts to abandon the practice.
But the S&P decision could force its hand.
"This was always going to happen. The rating cut certainly increases the likelihood that BHP will review its dividend policy later this month," IG's market strategist Evan Lucas said.
S&P said it had placed BHP on negative watch until the release of the company's half year earnings, due on February 23.
On Tuesday, BHP again reiterated that it remains committed to maintaining its strong balance sheet through the cycle.
S&P also placed Rio Tinto's long term `A-` rating on negative watch and said it could be lowered a notch if the company did not take further supportive measures such as reducing costs, divesting assets or reviewing its financial policy.
BHP shares, which have slid by about 50 per cent in the past year, were down more than two per cent at $14.92. Rio Tinto shares, which have declined nearly 40 per cent in the same period, were trading 3.7 per cent lower at $37.64.
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