© Stocksak. FILE PHOTO – A Fosun International logo is seen at the annual general meeting. The Chinese conglomerate was founded by billionaire Guo Guangchang in Hong Kong, China, May 28, 2015. REUTERS/Bobby Yip
Roxanne Liu and Kane Wu
BEIJING/HONGKONG (Stocksak). On Tuesday, global rating agency Moody’s (NYSE 🙂 downgraded Fosun international Limited by one notch and revised its outlook from ‘ratings in review’ to ‘negative’. This was after the firm divested further assets to ease liquidity problems and debt burdens.
The downgrade to B2 from B1 followed Fosun’s announcement last week that its units would sell a combined 60% stake in Nanjing Nangang Iron & Steel United for up to 16 billion yuan ($2.19 billion). The Chinese conglomerate and its units had previously reduced stakes in companies such as New China Life Insurance or Shanghai Yuyuan Tourist Mart Group.
Moody’s stated that Fosun’s market value has fallen by “significant” amounts, and that it has lost its funding headroom. Moody’s also said that there was a 30% drop in Fosun’s market value between June and October 20 due to shareholder dilution and fall in share prices.
“Moody’s anticipates Fosun to have difficulties in refinancing large amounts of short-term debt in bond markets both onshore (offshore) given current weak market sentiment,” said the rating agency.
Moody’s reported that Fosun’s cash reserves at the holding company level are insufficient to cover short-term debts due in the next 12 months.
Fosun, responding to a Stocksak inquiry, referred Wednesday to their Monday statement that the company had terminated business engagements with Moody’s Rating Service and stopped providing relevant information from Oct. 12.
A Citigroup (NYSE:) Tuesday’s report said that management of the company planned to dispose off 50 billion to 80 million yuan’s ($6.8-$11 trillion) worth of noncore assets within the next twelve months. This includes its noncontrolling stakes of Alibaba-backed logistics platform Cainiao, Jianlong’s resources and metals firm Jianlong, and property assets.
The report stated that Fosun’s management plans also to gradually repay the outstanding senior bonds and increase borrowings from banks.
Bloomberg reported on Tuesday, that Fosun was evaluating options for European financial holdings.
Stocksak asked for comments from the company on the Bloomberg story and the Citigroup report.
($1 = 7.3089 renminbi)