Bloomberg--Getty Images
By Lucinda Shen
April 26, 2016

A day ago ExxonMobil (xom) was one of just three U.S. companies that boasted a higher credit rating than the U.S. government—the prestigious AAA.

But on Tuesday, ratings agency Standard and Poor’s stripped that distinction from the energy giant which has held a top spot since 1949—even through the oil crashes of the 1980s and 2008—and lowered ExxonMobil’s rating to an AA+.

Now only two companies, Microsoft

and Johnson & Johnson

, are part of the AAA league.

Unlike its former peers, Exxon has a big problem: Oil. The rating change came in part due to recent “low commodity prices, high reinvestment requirements, and large dividend payments,” according to S&P. “The company’s debt level has more than doubled in recent years, reflecting high capital spending on major projects in a high commodity price environment and dividends and share repurchases that substantially exceeded internally generated cash flow.”

The rating, which is primarily used to measure the quality of a company’s bonds (or how capable the company is of paying them back), will make it more expensive for Exxon to borrow money from other entities.

And because of the recent oil glut, the price of borrowing has already gotten steeper for Exxon in the past year. Two months ago, the company issued about $12 billion worth of new bonds—one of the biggest corporate-debt issuances of the year. And even with its AAA rating, a 10-year bond offered an expensive yield: 1.3 percentage points more than Treasurys, according to the Wall Street Journal, in comparison to a year earlier when a 10-year bond yielded 0.58 percentage points more than government notes.

Exxon is unlikely to meet the necessary standards for an AAA rating until 2019, S&P stated. After all, the oil giant will likely have to spend even more capital to replace reserves and maintain production.

To be fair, AA+ is still a worthy credit score in most investors’ eyes—especially since in the past few decades, the number of companies with an AAA standard has dwindled.

 

Back in the 1980s, about 60 companies could claim the top-notch rating. In 2008, that fell to six. The U.S. government was downgraded to AA+ in 2011 (meaning that Johnson & Johnson and Microsoft can boast having a better rating than Uncle Sam).

Other oil companies including Chevron

and British Petroleum

also got downgraded amid the recent oil glut. Chevron’s rating dropped from AA to AA- in early February, while BP fell from A to A- a few weeks later.

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