Agency cuts ratings on power, resources firms
Fitch Ratings has downgraded its local-currency credit rating on two state-backed power generators and three resources firms, a day after the rating agency's downgrade of a Chinese sovereign rating by one notch.
The agency yesterday said it had cut its long-term local-currency debt rating of China Guangdong Nuclear Power Holding, China National Petroleum Corp (CNPC) and China Petroleum & Chemical (Sinopec) to A-plus from AA-minus, that of China Yangtze Power to A-minus from A and Aluminum Corporation of China's rating to BBB-plus from A-minus.
The cuts came after it revised China's long-term local-currency debt rating to A-plus from AA-minus, citing much faster credit growth than gross domestic product growth since 2009.
Bond specialists said the downgrades have yet to result in higher debt funding costs.
Charles Feng, regional head of fixed-income trading at Standard Chartered Bank, said the reaction among investors had been subdued, as the downgrades have so far been by just one agency.
A bond market banker said CNPC's foreign-currency cost of funding had not been affected, as the downgrades were limited to local-currency credit ratings.
Its US$2 billion dollar-denominated bond was about 10 times subscribed yesterday, a person close to the deal said.
Analysts said its subsidiary PetroChina is under pressure to raise funds to keep up with its dividend payout target.
Hurt by state fuel and natural gas price controls and ballooning capital expenditure, its debt-to-equity ratio surged to 34 per cent at the end of last year, from zero five years earlier, while its earnings before interest and tax margin tumbled to 8 per cent from 24 per cent, according to a Sanford C. Bernstein research report.
Additional reporting by Kanis Li and Ray Chan