Moody's downgrades Honghua

Moody's Investors Service said it downgraded Honghua Group Ltd.'s corporate family and senior debt ratings to B3 from B2. The outlook remains negative.

"The rating downgrade has been prompted by Honghua's weaker-than-expected results for 2014 and reflects our concern that the company's operations and credit metrics will worsen in the next 12 to 18 months because of sustained low oil prices," Kaven Tsang, a Moody's vice president and senior analyst, said in an agency news release.

"The downgrade and negative outlook also reflect our concern over the company's liquidity position, particularly given the difficult period ahead.”

Due mainly to losses in the oil and gas engineering services segment and higher transportation costs, the company’s adjusted EBITDA declined to RMB 772 million in 2014 from RMB 1.14 billion in 2013, which in turn resulted in a rise in its ratio of adjusted debt to EBITDA to 6.9 times from 4.2 times, the agency said.

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