(Add Rio Tinto (L:RIO) rating move)
By Cecile Lefort
SYDNEY, Feb 2 (Reuters) - Ratings agency Standard & Poor's on Tuesday lowered the credit ratings of BHP Billiton (L:BLT) Ltd BHP.AX and put it on negative watch, while it placed Rio Tinto on watch negative, both actions due to challenging market conditions for commodities.
The ratings agency cut BHP's debt to A from A-plus and said a further downgrade by one notch will depend on BHP's dividend policy and capital expenditure guidance due out this month.
The move reinforced market speculation the miner will have to lower its payout to shareholders.
S&P also placed rival company Rio Tinto's A-minus ratings on negative watch.
"We could lower the rating by one notch over the coming weeks if the company does not take supportive measures amid the currently weak commodity prices pressuring its cash flows."
Analysts expect Rio RIO.AX to maintain its dividend for now. ratings actions follows S&P's price assumptions for commodities, the agency said.
The price of iron ore, Australia's top export earner, has recently dropped to its lowest in over a decade.
Last month, Moody's placed 175 oil, gas and mining companies on review for a downgrade due to a prolonged rout in global commodities prices that it says could remain depressed for some time. some investors sliding commodities can result in debt bargains.
Sanjiv Shah, chief investment officer at London-based Sun Global Investments, singled out BHP's U.S.-denominated subordinated debt due in 2075 paying attractive yields of 7 percent and 7.48 percent.
"The long rout in commodity prices has hit debt and equity securities issued by metal and mining companies, with many securities looking oversold and therefore attractive if commodity prices do not fall significantly from current levels or stabilise at current levels."
BHP Billiton remains one of the highest rated mining companies.