Moody's gives B2 to Tianrui Cement notes

Moody's Investors Service said it assigned a provisional B2 senior unsecured rating to the three-year senior notes to be issued by China Tianrui Group Cement Co. Ltd.

Moody's also affirmed Tianrui Cement's B1 corporate family rating.

The outlook is stable.

Proceeds will be used to refinance the company's short-term debt and for general corporate purposes.

The proposed notes will improve Tianrui Cement's debt maturity profile and its liquidity position, Jiming Zou, a Moody's analyst, said in a statement.

Tianrui Cement has been funding its business mainly through short-term borrowings. Given that its cash position is well below its level of short-term debt, refinancing pressure is high, the agency said.

"This offshore funding exercise will also help Tianrui Cement broaden its funding sources - beyond the domestic bank and debt capital markets - and will provide funding stability for its business growth," Zou added.

Tianrui Cement's B1 corporate family rating reflects its leading market position in Henan and Liaoning provinces, and its strong level of sales visibility, as supported by demand from urbanization and investments in infrastructure, the agency said.

The rating is constrained by the company's short listing history and the absence of a track record of disciplined financial management and good corporate governance, the agency noted.

Another constraint is the volatile nature of the company's profitability due to its lack of pricing power in a fragmented market, Moody's said.

Moody's said it expects the company's debt to EBITDA to be in the range of 4.0x-5.0x in the next two to three years.

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