Shares of BHP Billiton Limited (ASX: BHP) have come under pressure today after the Standard & Poor’s took its knife to the miner’s credit rating.

As is the case with most other companies in the sector, BHP Billiton has come under intense pressure as a result of China’s slowing growth, as well as crashing commodity prices. The heavy declines in the prices of iron ore and oil have proven particularly damaging more recently and have acted as a drag on the group’s earnings and cash flows. Unfortunately, the outlook doesn’t look too bright either with many analysts forecasting further falls for both commodities.

As a result, the Standard & Poor’s credit ratings agency has lowered the credit rating of BHP from A+ to A. It also cut its credit rating on BHP’s subordinated notes from A- to BBB+.

The ratings agency also put BHP’s rating on “credit watch with negative implications“, meaning that more cuts could be in the pipeline. The outcome could largely depend on BHP’s half-year profit results which are expected to be released on 23 February, in which earnings are again expected to come under pressure.

However, the miner should provide further guidance on its capital expenditure plans (where it is expected to reduce capex to preserve capital) together with its plans for its “progressive dividend” policy. The miner has made it clear that the strength of its balance sheet is its top priority, suggesting that the dividend will almost certainly be cut now in order to avoid further credit rating downgrades.

As quoted by The Sydney Morning Herald, the S&P said: “we could lower the rating by another notch if the company remains committed to its progressive dividend policy while its cash flows are pressured by lower commodity prices.”

Indeed, others in the sector have already been forced to reduce shareholder payouts, including Fortescue Metals Group Limited (ASX: FMG) and, more recently, Glencore and Vale.

Although BHP noted that it still “has the strongest credit rating in the sector”, a lower credit rating can still drive the company’s borrowing costs higher to reflect the elevated risk. Indeed, with China’s economy slowing down at a rapid rate, and with commodity prices falling, there is every chance that conditions will get worse for the miner before they get better.

BHP’s shares have fallen 1.2% today to $15.07, but they’ve fallen more than 15% since the beginning of the year. Some analysts think the shares could fall to around $10 – or perhaps even lower – this year, highlighting the risks of holding the shares today.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.