Global rating agency Moody's Investors Service has downgraded BHP Billiton's debt rating by two notches, a blow to the Australian giant struggling with the downturn in global commodities.

The move by Moody's to cut BHP's debt rating to "A3" with negative outlook from "A1" early on Friday follows rival Standard & Poor's (S&P) cut to "A" from "A+" in early February.

Moody's cited the deterioration in the company's earnings and cash flow as the trigger for the downgrade, expecting the world's largest miner's credit metrics to remain substantially weaker as low prices and soft demand failed to offset changes in the company's dividend policy.

"Moody's views there to have been a fundamental downward shift in the global mining sector, with the downturn being deeper and the recovery likely to take longer than previously expected," the agency said in a statement.

BHP, which has long said its prized investment grade credit rating remained its top priority, said in a statement it "remains committed to maintaining its strong balance sheet through the cycle".

BHP Billiton scrapped its progressive dividend to only pay out at least half of its underlying profit to its shareholders going forward when it announced a 5.67 billion U.S. dollar net loss in the six months to December last week.

BHP's shares gained 1.33 percent or 23 Australian cents to 17.48 Australian dollars in early trade on Friday, boosted by higher commodities prices and news it had reached a settlement with the Brazilian government regarding the Somarco dam collapse. Endit

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