Fitch lowers West China Cement, debt to B+

Fitch Ratings said it downgraded West China Cement Ltd.’s long-term issuer default rating and senior unsecured rating to B+ from BB- and removed the ratings from Rating Watch Positive (RWP).

The outlook on the issuer default rating is stable.

The removal of the RWP follows the termination of Anhui Conch Cement Co. Ltd.’s (A-/stable) plans to acquire a controlling stake in West China Cement.

The downgrade was driven by West China Cement’s increased leverage in the current weak operating environment, the agency said.

Conch and West China Cement jointly said on June 30 that Conch will not take a controlling stake in West China Cement as the parties did not obtain all necessary regulatory approvals by the targeted completion date. Fitch said the transaction would have increased West China Cement’s size as Conch would have injected four of its plants into West China Cement.

Furthermore, as a subsidiary of a larger and financially stronger company, West China Cement would have been able to substantially lower its financial costs.

Conch remains as the second-largest shareholder of West China Cement (owning 21.2%), but it is unclear what actions the two companies can take to improve West China Cement’s business and financial profiles, according to the agency.

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