Moody’s puts Sinochem on downgrade review

Moody’s Investors Service said it placed Sinochem Hong Kong (Group) Co. Ltd.’s A3 issuer rating on review for downgrade.

Moody’s also said it placed on review for downgrade the A3 rating of the senior unsecured bonds issued by Sinochem Overseas Capital Co. Ltd., along with the A3 rating of the senior unsecured bonds and provisional A3 rating of the senior unsecured medium-term note program of Sinochem Offshore Capital Co. Ltd. and the Baa2 rating of the subordinated guaranteed perpetual capital securities issued by Sinochem Global Capital Co., Ltd.

All of these bonds are guaranteed by Sinochem Hong Kong.

The review is due to concerns over Sinochem’s weak earnings in its upstream exploration and production business due to the material decline in global oil prices and the company’s rising leverage, Moody’s said.

The agency said it expects the company upstream exploration and production segment, which is one of the company’s core businesses, will report a loss in 2015 driven by the sharp decline in oil prices.

While the company’s diversified portfolio in the fertilizer, oil trading and property sectors, as well as its prudent financial policy provide some stability for its credit profile, Moody’s said it estimates the company’s leverage will rise meaningfully to about 8x at year-end 2015.

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