Fitch rates Honghua ratings BB

Fitch Ratings said it assigned a long-term foreign-currency issuer default rating of BB to Honghua Group Ltd. with a stable outlook.

Additionally, Fitch said it assigned a senior unsecured rating of BB and an expected BB rating to Honghua’s proposed dollar-denominated senior unsecured notes.

The ratings reflects Honghua’s strong market position as a low-cost, high-quality producer of land rigs and the positive market outlook due to strong drilling activity in regions where the company’s key customers operate, the agency said.

The ratings also consider the company’s limited operating scale and evolving business model, Fitch said.

The notes are rated at the same level as the senior unsecured debt rating as they represent direct, unconditional, unsecured and unsubordinated obligations of the company, the agency said.

Honghua is able to price its rigs at 20% less than its international peers mainly due to the lower costs of building the rigs in China and using mainly Chinese-made parts, Fitch said.

The company has gained market share over the years and now ranks as the largest land rig builder in the world with a 14% market share in terms of the number of rigs fabricated in 2013, the agency said.

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