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Moody's downgrades China Jinjiang Environment's corporate family rating, USD bond

MOODY'S Investor Service on Monday downgraded Chinese waste-to-energy company China Jinjiang Environment Holding's (CJE) corporate family rating to Ba3 from Ba2, and the senior unsecured rating on its US-dollar bond due 2020 to B1 from Ba3.

Its ratings outlook for the company is negative due to the group's continued challenges relating to CJE's tight liquidity position and refinancing risk, and upward rating trend is unlikely.

Moody's also explained that the senior unsecured rating on the USD bond is one level lower than that of the corporate family rating as the company has "substantial" debts mostly on a secured basis at its subsidiaries level. In the event of default, this would complicate the expected recovery of the bond.

Moody's said an outage of facilities which occurred as the CJE was ramping up overseas expansion raised its level of credit risk. It also said that the company has a challenging liquidity position and refinancing task.

The ratings service expects that in the next year, CJE's available liquidity sources including cash-on-hand, operating cash flow, and available committed facilities will not be enough to meet its high levels of maturing debt, as well as capex requirements for its projects.

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There is also risk from restrictive covenants in certain loan agreements, and the possibility that further ratings downgrade will trigger accelerated debt repayment obligations.

Guo Qingqing, a Moody's assistant vice-president and analyst, added: "Moody's sees continued uncertainty related to the credit profile of the ultimate parent company, Hangzhou Jinjiang Group, reflecting the volatile aluminium and raw material prices, tightened environmental regulations, and the stricter lending policies applicable to the oversupplied industry".

The group has been developing overseas projects in Brazil, India, Indonesia and Singapore, which would require
incremental debt, increasing its financial leverage further, and burdening its overall credit profile.

CJE said on Tuesday morning in a stock exchange disclosure that it noted Moody's concerns and are taking steps to address them, including monitoring the pace of its expansion and strengthening its cash position.

CJE closed on Monday unchanged at S$0.590.

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