Fitch downgrades Yingde Gases

Fitch Ratings said it downgraded Yingde Gases Group Co. Ltd.’s long-term issuer default rating to B+ from BB.

The outlook is stable.

The agency also downgraded the senior unsecured debt ratings of Yingde and Yingde Gases Investment Ltd. to B+ from BB with recovery rating of RR4.

Yingde Gases Group’s long-term issuer default rating also was downgraded to B+ from BB and its senior unsecured debt to B+ from BB with recovery rating of RR4.

Yingde Gases Investment’s senior unsecured debt rating also was downgraded to B+ from BB with recovery rating of RR4, the rating on $425 million 8 1/8% senior unsecured notes due 2018 to B+ from BB with recovery rating of RR4 and the rating on its $250m 7¼% senior unsecured notes due 2020 to B+ from BB with recovery rating of RR4.

The notes were issued by Yingde Gases Investment and guaranteed by Yingde Gases Group, Fitch said.

The downgrades reflect the increase in Yingde’s customer risk and weakening bargaining power, especially in the steel sector, where financial positions have deteriorated due to persistent industry weakness, the agency said.

The higher risks are evident in recent news that Yingde has lost control of its Pingshan plant after the customer occupied it; its inability to collect payments fully from Shaanxi Longmen Iron and Steel Co., Ltd. since 2013; and steelmakers accounting for about 70% of Yingde’s customers, Fitch said.

Yingde’s receivable days have lengthened and the proportion of delinquent receivables has remained large, which have led to deterioration in its leverage position, the agency added.

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