Moody's revises Hilong view to negative

Moody's Investors Service has changed the outlook on Hilong Holding Ltd. to negative from stable and affirmed the company's Caa1 corporate family rating.

"The negative outlook reflects Hilong's rising refinancing risk over the next 12-18 months, because its cash resources as of the end of September 2023 and our forecast cash flow for the company will be insufficient to cover the $314.5 million notes maturing in November 2024, and its capital investment requirement," said Chenyi Lu, a Moody's vice president and senior credit officer, in a press release.

"Its weak liquidity and hence heightened risk of default offset Hilong's improving business operations and steady earnings, and its solid market positions in the drill pipe and oil country tubular goods (OCTG) coating materials and services sectors," Lu added.

The agency noted that as of the end of September, Hilong had cash and cash equivalents of RMB 558 million. These liquidity sources and Moody's estimated operating cash flow for the company of around RMB 550 million to RMB 575 million over the next 12-18 months will not cover its RMB 606 million of short-term maturing over the next year.

Additionally, Hilong has RMB 2.28 billion of debt maturing within the next 12-18 months, including its RMB 2.26 billion ($314.5 million) U.S. dollar bonds in November 2024; and its estimated maintenance capital spending of about RMB 150 million over the next 12-18 months.

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